PRENUPTIAL AGREEMENTS IN TEXAS

Pre-nuptial or “premarital” agreements are indeed an important part of Texas estate and marriage planning. Like all contracts, a prenuptial agreement is one which the courts will always try to honor, and a change of mind, or of circumstances, will rarely allow you to escape its clutches. Here is an interesting case in point.
Rebecca and James married in 2005. Prior to their marriage, they entered into an “Agreement In Contemplation of Marriage” or a prenuptial agreement. The prenuptial agreement called for a payment to Rebecca, through a lump sum, in the event of a divorce. Interestingly, the agreement also provided that if Rebecca ever contested the prenuptial agreement, then she would lose even that lump sum payment and get nothing. The agreement specifically provided that Rebecca would get zero if she ever “sought to invalidate some or all of the agreement.”

As you’ve probably guessed, James later filed for divorce and commenced making the agreed-to payments to Rebecca under the terms of the prenuptial agreement. Alas, but James soon fell behind in his payments to Rebecca. In response, Rebecca filed a countersuit against James, seeking either to (A) compel him to make the promised payments, or (B) to rescind the agreement after James’s default and thereby go after her share of the estate which she would have received absent the prenuptial agreement (certainly a much larger sum, to be sure).

James seized upon Rebecca’s “Option B” request and now claimed that Rebecca was entitled to nothing since she was attacking the provisions of the prenuptial agreement! After a jury trial, a jury found that Rebecca did, indeed, attempt to rescind the agreement in violation of the forfeiture clause, but it also found that Rebecca was “excused” from such violation since James had previously violated the agreement. The trial judge, however, overturned the jury’s verdict and held that James was entitled to rely upon the agreement’s forfeiture clause since Rebecca had sought to rescind the contract. In sum, Rebecca would get nothing since she tried to invalidate some or all of the agreement. Rebecca appealed.

In 2018, the Texas Supreme Court in In The Matter of the Marriage of I.C., held that there was no “just cause” exception to save Rebecca from the agreement’s forfeiture clause. Despite the Supreme Court noting that earlier courts consider such forfeiture clauses unenforceable when a spouse seeks to invalidate it after the other spouse’s breach of the agreement, Rebecca had already agreed within the contract what her remedies would be for James’ breach. Tragically, the Texas Supreme Court stated, “The parties could have agreed that James’s failure to make a periodic payment would nullify the entire Agreement . . . but they did not.” In sum, the general rule of contracts is that when one party breaches an agreement, the other party is thereafter relieved from complying with the contract. This is apparently not true when there is a forfeiture clause and the remedies for a breach of the agreement do not state that the innocent party is released from contractual obligations upon the other’s breach.

LESSON: In any prenuptial agreement with a forfeiture clause: If you represent the “poorer” spouse, make sure that your client is given the right to rescind the agreement upon the other party’s breach, since old contract rules of equity will not justify you in attacking the contract even if the other side breaches it first.