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Byline: John Fotheringham, Shoosmiths

QQ: When other people are thinking of June brides this month, those responsible for protecting wealth are often thinking of legal contracts, aren't they? Historically a wealthy family might insist on a pre-nuptial agreement to protect their offspring from opportunists and adventurers, but the relative certainty of Scots law has rendered pre-nups less important than in some other jurisdictions.

More recently the rise in second and subsequent marriages has made the pre-nup more common to protect the interests of the children of the first family from the potential claims of later unions. An individual may want to ensure the children from their first marriage do not lose out to the demands of a new stepparent or step-siblings. Similarly a client may want to ensure their new relationship will not diminish the assets they won in their divorce from their ex-spouse.

QQ: What does a pre-nup consist of? A pre-nup is a contract and most of the normal rules of contract apply to it. Parties are free to agree what they like and, generally, their agreement will be respected and enforced by the Scottish courts. As with an ordinary contract it can be set aside if it was entered by fraud or by force and fear.

If it wasn't truly voluntarily then it won't be enforceable by the guilty party. But there is another protection for the weaker party. If the agreement was not"fair and reasonable at the time it was entered into"then the court can set it aside even if there was no fraud and nobody was forced into signing.

The person wishing to nullify the agreement has to show it was unfair or unreasonable at the time it was signed. Later changes of circumstances won't count.

QQ: Can you give an example? There was one particularly telling example in which the party signed a post-nup agreement - the principles of which are the same as for pre-nups - and neither of the parties had been aware the husband had a substantial pension interest which should have been taken into account.

The husband hadn't hidden the pension interest from his wife; he hadn't known of its relevance. When the wife later challenged the deal, the court said although everybody had acted in good faith the deal had been unfair at the date of the signing.

Scots family law is not plagued by the very broad judicial discretion of the law in England and Wales. Not only does that lead to uncertainty in their law, it also encourages speculative litigation.

QQ: Why should a pre-nup be so useful in the Scottish context? There are two main reasons. The first is that our robust system is not totally rigid, and it is sometimes useful in marginal cases to remove doubt about whether or not a particular asset or group of assets should be included in the matrimonial pot for division.

The second reason is that people move around a lot more than they used to. A Scots couple may well live part of their married life in another country in which the state of the law may be very different. A Scots pre-nup which declares that Scots law will apply can help to allow parties to rely on their original agreement even if they have moved to a foreign jurisdiction.

Business assets, farm assets, shareholdings in family companies, assets which people want to earmark for particular members of the family are all prime territory for bitter litigation in a family dispute. A well-drafted pre-nup is often the best way to keep the peace before it's lost. | | John Fotheringham is a consultant in the Family Law Team of Shoosmiths in Edinburgh.
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Publication:Insider Monthly
Date:Jun 6, 2017
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