My previous article covers the marriage contract issues and explains the main rules for those who intends to enter into a marriage contract in Ukraine. This article describes how to mitigate the risk of a contract being judicially challenged and shield from adverse consequences.
A marriage contract may be challenged in court just as any other contract. Case law shows that marriage contracts are most often challenged due to statutory provisions violation.
The Family Code of Ukraine ("Family Code") says that the marriage contract may not:
- contradict the Ukrainian law or public morals
- diminish the scope of a child's statutory rights
- put either spouse at an extreme financial disadvantage
- provide for a transfer of the ownership of any real or other property to either spouse where the right in that property is registrable by the state
A common ground for a marriage contract to be judicially challenged and held invalid is that either spouse has been put at an extreme financial disadvantage.
Before going into more detail about the grounds on which a contract may be found to have put either spouse at an extreme financial disadvantage, I will discuss in a few words the general principle to be relied on in drafting and negotiating a marriage contract.
This principle is spousal equality. In law, women and men enjoy equal rights and responsibilities in a marital relationship, marriage, and family.
Under the presumption set out in the Family Code, any property acquired by spouses during their marriage is owned as a joint tenancy by the wife and the husband, irrespective of the fact that either of them had no earnings (income) of their own for valid reason (education, housekeeping, childcare, etc.).
Parties to a marriage contract may agree that joint tenancy will not extend to any property acquired during their marriage, and they may consider such property as a tenancy in common or as personal private property of each of them.
In addition, the provisions of a marriage contract should take into account the principle of equality of spousal rights and responsibilities. A contract giving rise to a legal-status imbalance between the husband and the wife may be challenged and invalidated in a court of law.
In case No. 755/5802/20, the Supreme Court concluded in its decision that the freedom of contract is significantly limited in the regulation of property relations between spouses. Parties may not set out any such terms or conditions in contracts between them which, if implemented, would result in a significant imbalance between the rights and obligations of each spouse.
Ukrainian law does not define "extreme financial disadvantage" and it is therefore an evaluative concept. The court reviews the case file and evaluates the family situation on a case-by-case basis.
The "risky" terms of a marriage contract that could potentially be grounds for challenging and invalidating the contract include, for example, those under which:
- either spouse is deprived of the rights in all property to be acquired in the marriage
- either spouse is deprived of the rights in any property acquired as personal private property before or during the marriage
- either spouse unilaterally waives all income in favour of the other spouse
- all or substantially all (more than 80 per cent of) the property will pass to either spouse in the event of a divorce
- responsibilities are allocated unequally, such as where either spouse has to maintain the other spouse's relatives
The above list is not exhaustive and may only serve as an indicative guide in drafting a marriage contract. However, drafting contractual terms for each couple requires a tailored approach that considers the family's needs, the property condition of each spouse, the aspects of doing business by either spouse (or both), and other factors.
Another ground (found in case law) for challenging a marriage contract is that the terms of the contract violate Article 93(5) of the Family Code, which expressly prohibits any transfer of the ownership of any real or other property to either spouse where such property is registerable by the state. For instance, by its decision in case No. 522/25760/16, the Supreme Court held invalid a contractual clause under which the ownership of certain property registered in the name of the claimant was to pass to the defendant following the marriage dissolution.
In addition to the foregoing, a marriage contract will be rendered invalid by failure of one or both parties to comply with the following requirements at the time of its execution:
1) the expression of will by each spouse at the time the marriage contract is made must be free and correspond to that spouse's inner will
2) the marriage contract must be aimed at causing the legal effect contemplated thereby
Also, under Ukrainian law, no marriage contract may govern any personal relations between the spouses or between them and their children.
A qualified family law attorney whose expertise includes the contract-based regulation of spousal relationships will be able to thoroughly analyse the individual situation of each couple and draft contractual terms that will shield each spouse by making sure their marriage contract will not be challenged and invalidated.
