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Under Section 21J  of the Property (Relationships) Act 1976 a court may set a Contracting Out Agreement (Pre-Nup) aside if would cause serious injustice

To summarise this section, a Court may set a relationship property agreement aside if, having regard to all the circumstances, it is satisfied that giving effect to the agreement would cause serious injustice.  In deciding whether the agreement would cause serious injustice, the Court must have regard to:

1. The provisions of the agreement;
2. The length of time since the agreement was made;
3. Whether the agreement was unfair or unreasonable in light of all the circumstances at the time it was made;
4. Whether the agreement has become unfair or unreasonable in light of any changes in circumstances since it was made (whether or not those changes were foreseen) by the parties;
5. The fact that the parties wished to achieve certainty as to the ownership of their assets and liabilities and how these would be divided between them should the relationship end; and
6. Any other matters the court considers relevant.

Cases that have been overturned for being unjust are very often because the circumstances have changed since the agreement was drafted.  For example, Mary and John decide at the beginning of their relationship to set out in a Contracting Out Agreement what assets belong to them to make it clear what would happen should their relationship end.  Mary has a good job earning enough money to support her and John.  John is studying to be a doctor and has no assets.  Mary has enough money to put a deposit on a house. 

Mary and John agree to buy a house together and Mary’s deposit will remain her separate property should the relationship end.  They are registered as joint owners of the property.  They also agree that their income will remain their separate property.

Five years later, John has completed his studies and is now working as a doctor.  They decide to have children together.  Mary stays home to take care of the children.  Her career is put on hold while John’s is taking off.  After 20 years, John has accumulated over $1.5 million in assets while Mary’s only asset is her original deposit and ½ share the home which equates to $500,000.  The relationship ends and under the Contracting Out Agreement, John is going to get over a million dollars more than Mary.

This is unjust because Mary supported John financially while he studied and also supported his career and the opportunity to obtain these assets by staying at home to take care of their children.  When the agreement was drafted it was fair but after 20 years, it would cause serious injustice if the agreement were upheld.  Therefore, it is very likely this agreement would be overturned in court.

The purpose of a Contracting Out Agreement is to give you certainty.  That is why it is important to consider your future and whether your circumstances are likely to change over time.  Keeping that in mind will ensure the agreement is drafted in such a way to ensure it doesn’t become so unjust that it is overturned at a later date.