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Community Property • Altering Character of Assets by Agreement
CPROP#033
Legal Definition
Agreements made before marriage (i.e., prenuptial agreements) do not require consideration, but must be in writing and signed by both parties to satisfy the Statute of Frauds. There are two exceptions: (1) where the oral agreement is fully performed (but the performance must be something other than the marriage itself), or (2) estoppel based on detrimental reliance.
Plain English Explanation
A prenuptial agreement made before getting married does not need anything valuable exchanged to make it valid. But it must be in writing and signed by both people getting married. However, there are two exceptions where a spoken/oral prenup agreement can be enforced: (1) if one of the parties in the agreement fully carries out the performance portion of their obligation, besides getting married, or (2) if one person relied on the spoken agreement and it would be unfair not to enforce it.
The most confusing part of the exceptions is probably the "full performance" aspect of exception #1. To better understand, let's look at where this rule comes from:
In 1990, a case (Hall v Hall) was heard where a man and woman wanted to get married but the woman refused to sign a prenup because she was afraid if they divorced she'd be left with nothing and have no place to live for the rest of her life. In response, the husband orally promised her that if she married him, she could live in his house until she died so long as she quit her job, applied for Social Security at age 62, and pay him $10,000 in cash. They married, and the woman fulfilled every part of the agreement. However, the house was held in a trust and before the attorneys could amend it, the man died. Even though there was no written evidence of the prenuptial agreement, a court held that the woman's full performance of her obligations under the agreement were sufficient to be an exception under the Statute of Frauds, because, as you will learn in Contracts, the purpose of the Statute of Frauds is to establish that there was a real contract — so why would the woman have acted this way if not for one?
The most confusing part of the exceptions is probably the "full performance" aspect of exception #1. To better understand, let's look at where this rule comes from:
In 1990, a case (Hall v Hall) was heard where a man and woman wanted to get married but the woman refused to sign a prenup because she was afraid if they divorced she'd be left with nothing and have no place to live for the rest of her life. In response, the husband orally promised her that if she married him, she could live in his house until she died so long as she quit her job, applied for Social Security at age 62, and pay him $10,000 in cash. They married, and the woman fulfilled every part of the agreement. However, the house was held in a trust and before the attorneys could amend it, the man died. Even though there was no written evidence of the prenuptial agreement, a court held that the woman's full performance of her obligations under the agreement were sufficient to be an exception under the Statute of Frauds, because, as you will learn in Contracts, the purpose of the Statute of Frauds is to establish that there was a real contract — so why would the woman have acted this way if not for one?
Hypothetical
Hypo 1: Before marrying Amy, Bob proposes a prenuptial agreement, but Amy is hesitant. She worries about losing her financial security during the marriage and having nowhere to live afterwards. To reassure her, Bob orally promises that if Amy marries him, she can live in his house for the rest of her life. In exchange, Amy must give up her job, apply for Social Security benefits at age 62, and give Bob $10,000. Trusting Bob, Amy agrees. The house is part of a revocable trust, with Bob as the trustee and sole beneficiary during his lifetime, and his sons from a previous marriage as the residual beneficiaries. After their marriage, Amy follows through on her promises. She leaves her job, applies for Social Security at the agreed age, and gives Bob the $10,000. To formalize her right to live in the house, their attorney drafts an amendment to the trust, granting Amy a life estate in the property. However, before signing the amendment, Bob passes away unexpectedly. His sons, as the residual beneficiaries of the trust, then challenge Amy's right to live in the house. Result: The trial court, considering Amy's actions, finds that her partial performance of the oral agreement qualifies as an exception to the Statute of Frauds requirements. This is also based on the doctrine of promissory estoppel, which applies when one party significantly relies on a promise made by the other party. Since Amy acted on Bob's promise by quitting her job, applying for Social Security, and paying him $10,000, her reliance on Bob's promise is evident and significant. Consequently, the court rules in Amy's favor, allowing her to live in the house for the rest of her life.
Related Concepts
Are California spouses bound by community property rules against their will?
Can parties agree to limit child support in a prenuptial agreement?
What are the defenses to enforcement of a prenuptial agreement?
What are the requirements for a prenuptial agreement to be deemed signed voluntarily?
What are the two main types of unconscionability claims and who decides on them?
What happens to terms within a prenuptial agreement that are deemed to promote divorce?
