Contracting Out Agreements

A contracting out agreement is a document that couples can create in order to waive their rights under the Property (Relationships) Act. This means couples can outline by way of agreement how they wish to divide property, assets and liabilities in the event of a separation.

A contracting out agreement, or otherwise referred to as a prenuptial agreement, is essentially a type of insurance policy. It is a good idea to enter into a contracting out agreement where one party to a relationship holds significant assets, such as property (housing), substantial inheritance, a business, or a greater earning capacity, and wishes to retain and protect these in case of a separation.

As this is an agreement which waives rights provided by law, it must be created and executed in a certain way. For example, it must be signed by both parties and witnessed by a solicitor (lawyer) who confirms they have explained the implications and contents of the agreement. Each party must also receive independent legal advice, that being, advice from their own individual lawyer. 

It is important to seek legal advice in relation to implementing a contracting out agreement as if it is not drawn up according fundamental principles as required under the Act; lacks complete disclosure of assets and liabilities at the time the agreement was made; or where an agreement creates a “serious injustice”[1] to one party, the Court has the power to make an agreement void if it contested at the time it is being enforced. Therefore, it is also important that contracting out agreements are regularly reviewed to ensure it is still fit for purpose and is protecting your assets (and liabilities) as desired.   

[1] White v Kay [2017] NZHC 1643, [2016] NZFC 4942