INTRODUCTION
To paraphrase the signature song from the Broadway musical "A Chorus Line," a premarital agreement is "One _ _ _ Singular Transaction." At the same time that two people are planning a wedding and starting a life together, they're preparing a contract that addresses the legal consequences of the end of their marriage. It's clearly a clash between Love and the Law.
Imagine a couple about to get married. Ah, romance is in the air. Sweet expectations abound (realistic and otherwise). The "two" are about to become "one." But wait, maybe there's something about that "one-ness" that doesn't quite fit. Perhaps there should be some exceptions, or even many exceptions. Perhaps they should be identified and discussed.
At some point (hopefully well before the wedding), it may occur to one or both of them that, from the moment they become legally married, certain legal rights and duties begin to accrue to each of them. Some of those rights and duties are more precise than others, but the longer they are married, the more important they're likely to be. In a way, they're like twin water tanks building up to overflow (or time bombs waiting to explode) on that inevitable day when their marriage will end, either by divorce or by death.
Every marriage-contemplating couple could benefit from some thoughtful reflection and discussion about their respective understandings and expectations of what life together will be like.
For some couples, a thoughtful, informed premarital agreement can be of great benefit in confirming some expectations, identifying concerns, protecting certain interests, providing appropriate benefits and bringing at least some measure of order and certainty to what might otherwise be a very disorderly, uncertain and expensive divorce action or probate proceeding.
In Hawaii, premarital agreements are authorized and encouraged. Since 1987, the Hawaii Uniform Premarital Agreement Act ("HUPMAA")1 has provided that such agreements are enforceable and binding, if they are in writing and signed by both parties, are voluntarily executed, and are not unconscionable.
The two leading cases that address the standards of voluntariness and unconscionability are Lewis v. Lewis and Reese v. Reese, both decided together by the Hawaii Supreme Court in 1988.2Although those cases involved premarital agreements that were executed before the 1987 Act, they have been consistently cited with approval ever since.
In Lewis, the Hawaii Supreme Court held that, "unless the agreement rises to the level of unconscionability, a merely inequitable agreement is not unenforceable under contract law" and cited two basic principles that are within the concept of unconscionability: "one-sidedness" and "unfair surprise." As applied to premarital agreements, "one-sidedness" would mean that the agreement leaves a post-divorce economic situation that is "unjustly disproportionate." "Unfair surprise" would mean that one party did not have full and adequate knowledge of the other party's financial condition when the premarital agreement was executed.
Even if such an agreement is unconscionable, however, a party against whom enforcement is sought may still be bound by it (if voluntarily entered into) unless that party can prove three things, namely that he or she:
1. Was not provided a fair and reasonable disclosure of the property or financial obligations of the other party; and
2. Did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and
3. Did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party.
The ICA recently tightened the grip of that third prong by observing that the party who claimed he shouldn't be bound by the premarital agreement he signed hadn't asked for any financial disclosure from the other party.3
WHY HAVE A PREMARITAL AGREEENT?
There are several motivating concerns, including:
1. The Specter of Divorce Claims.
Perhaps the biggest incentives for a premarital agreement are to protect assets in the event of a divorce and to limit the duration, scope and expense of the divorce proceeding itself.
Unfortunately, too many marriages just don't prosper. Statistics suggest that almost half now end in divorce. No matter how happy the couple and how remote the prospect that of a break-up may seem, it's prudent to at least consider the possibility of (and what results might flow from) a divorce.
While the divorce laws of every state are unique and often provide different "packages" of rights and duties, they all provide vast opportunities for contentious and expensive proceedings and for unpredictable results.
The battles are not about whether someone is entitled to a divorce. Hawaii and most other states are now "no-fault" in the sense that neither spouse has to prove that the other did something wrong in order to get a divorce. The disputes are commonly about finances and children. While HUPMAA does not authorize the parties to pre-determine any child-related issues such as custody, time-sharing or support, it does authorize the parties to make appropriate arrangements about their own finances.
To the extent not otherwise covered by the terms of a premarital agreement, Hawaii divorce law provides less-than-fully-specific property division guidelines, and even less specific alimony guidance. To oversimplify, our family court judges (following the statute regarding division of property4 and appellate case law establishing "Marital Partnership Principles")5 must examine whatever relevant and credible evidence is presented, and then:
a. Identify and value all...
