Contractual Certainty

Contracting-Out Agreements

Most people would agree that a properly executed contract or agreement should withstand any challenge to its validity and its terms. Given contractual certainty is a cornerstone of legal practice, clients who ask their lawyer to prepare a specific contract or agreement justifiably want some reassurance that it provides for certainty as much as is possible in the circumstances.

A deal is a deal, after all. Or is it?

When it comes to signing a contracting-out (pre-nup) agreement under the Property (Relationships) Act 1976, it is important for you to think beyond your current situation and do some crystal ball gazing. This is because there may be factors beyond those that are present in the immediate moment that could become relevant later on.

The current law provides that a court can set aside or alter a contracting-out agreement if not doing so would cause serious injustice to one of the parties. In deciding whether or not to do this, the court looks at: the agreement's terms; how long since it was made; whether it was unfair or unreasonable when it was made (or it has become so because of changed circumstances); and other relevant matters. Accordingly, it makes pragmatic sense then for you to view your contracting-out agreement as a 'living document'.
 

Bearing this in mind, the surest course of action is to ask your lawyer to ensure that the agreement records rules about the ownership of property (including future property) and the division of such property when the relationship ends.

 

The agreement should provide for different results according to the number of years the relationship lasts and whether there are any children of the relationship. It is a good idea to include a review clause to serve as a reminder to formally review your property ownership situation from time to time whilst your relationship endures.

A well thought-through and forward-looking contracting out agreement will likely stand the test of fairness and reasonableness in the face of challenge. A change in your circumstances such as getting married, buying a house together, having a baby, starting a business together, will all have a bearing on how fair the terms of the agreement might be considered by a judge (if put to scrutiny). It is important to review the agreement at various intervals throughout your relationship with the onus resting on you to do so. A new agreement should be recorded in a formal manner so that no more is left to chance than is absolutely necessary.

 

The information contained here is of a general nature and should be used as a guide only. Any reference to law and legislation is to New Zealand law and legislation. We recommend that before acting on it, you consult a lawyer to discuss your specific situation.