Ratification of Prenuptial Agreements
Posted Monday, January 21, 2013 by John S. Palmer
A contract may be voidable if it was obtained by coercion, misrepresentation, undue influence or fraud, which means the wronged party has the right to rescind it. However, a party can lose the right to rescind a voidable contract through ratification, which is generally defined as remaining silent or continuing to accept a contract’s benefits after discovering facts that warrant its rescission.
Prenuptial agreements, however, are a special class of contract that cannot be ratified after the fact, according to a recent decision by the Washington Court of Appeals.
The case involved a surviving spouse who challenged the validity of a prenuptial agreement after her husband’s death; she claimed that it was not substantively or procedurally fair, as required by Washington case law.
During the marriage the husband operated 3 casinos in South Dakota; because South Dakota limits an individual to 3 gaming licenses, the wife applied for a gaming license and relied on the prenup to convince the state gaming commission that her finances were separate from her husband’s. She told the commission that she did not intend to make any claim against her husband’s separate assets and was prevented from doing so by the prenuptial agreement. The husband’s estate argued that regardless of whether the agreement met the test of substantive or procedural fairness, the wife had ratified it by relying on it when applying for the gaming license prior to the husband’s death.
The Court of Appeals disagreed and held that prenuptial agreements cannot be ratified after the fact. It noted that “parties to a prenuptial agreement are unique, because they do not deal with each other at arm’s length…Their relationship is one of mutual confidence and trust which calls for the exercise of good faith, candor and sincerity in all matters bearing on the proposed agreement.”
The court pointed to a 1934 Washington Supreme Court decision which held that a surviving spouse did not waive the right to challenge a prenuptial agreement after a spouse’s death merely because she failed to challenge it while the deceased spouse was alive, because an “economically subservient spouse could not be expected to challenge the dominant spouse during his lifetime.”
The Court of Appeals took this decision one step further and explicitly held that “a prenuptial agreement that is substantively and procedurally unfair is void from its inception and is incapable of ratification.”
The court went on to find the agreement valid, rejecting the wife’s claim that it was procedurally unfair because it was signed 5 days before the wedding. This portion of the opinion will be the subject of an upcoming blog post.
Kellar v. Estate of Kellar, Washington Court of Appeals, Division I, docket no. 66828-5-I, decided December 31, 2012.
UPDATE JUNE 14, 2013: A Petition for Review of the Kellar decision has been filed with the Washington Supreme Court. The court is expected to decide whether to accept review when it meets in October.
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