How can you cancel a Contracting Out agreement?

If a Contracting Out Agreement is seriously unjust, or the circumstances have significantly changed, they can be cancelled (set aside) by the Court.

Contracting Out Agreements (pre-nuptial agreements), can be a useful tool for parties to protect their property when entering into a new relationship.  Contracting Out Agreements can be done any time during the relationship, but are more likely to be agreed to within the first 3 years of a relationship.

When a relationship ends, one of the first things that a family lawyer will ask you is whether or not there is a Contracting Out Agreement in place.  If there is, the Contracting Out Agreement will often dictate how the property of the relationship is to be divided at separation. 

In some instances, a partner or spouse may argue that the Contracting Out Agreement should not be enforced.  A Contracting Out Agreement can be cancelled or set aside by the Court in limited ways. 

The most common reason for the Court to set aside a Contracting Out Agreement is if the terms of the Contracting Out Agreement would cause a serious injustice to the party that is most restricted by the terms of the Contracting Out Agreement.

A serious injustice would arise if the parties’ circumstances change during the relationship to the point where the Agreement, that they had signed to contract out of equal division of property, would then be extremely unfair and would leave the lesser party in hardship.

Another reason why the Court may set aside a Contracting Out Agreement is if there are children of the relationship who are under 18 years old. The effect of children entering the relationship increases the chances of the people changing their roles in the relationship.  For example one parent could stop working or stop their career progression in order to look after children. The effect of this can lead to that parent finding it much more difficult to re-enter the workforce after separation.

Usually, there are review clauses in a Contracting Out Agreement that provide dates on which the parties can review the Agreement or provide guidance as to which events would trigger a review of the Agreement.  If parties can agree to dates or events that would trigger a review of a Contracting Out Agreement, then it will keep the Agreement relatively strong and can avoid potential disputes arising at the end of the relationship.

Shaun Cousins
Family Lawyer
Wellington, New Zealand

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