Why You NEED To Review Your Contracting Out Agreement

6 November, 2017 | Natalie Miller

Article reviewed and updated March 2025

Contracting out agreements, otherwise known by their widespread American connotation as “prenups”, are increasingly popular and are becoming a “must have” for parties when entering into a relationship. But too many couples are using a set-it-and-forget-it approach. A correctly executed contracting out agreement can start to lose it’s certainty over the passage of time if it is not reviewed regularly.

Why are they so popular?

The Property Relationships Act 1976 (‘the Act”) dictates that most assets/liabilities in a qualifying relationship are to be divided 50/50 if that couple were to separate – subject to exceptions.

A contracting out agreement “contracts out” of the 50/50 sharing regime and allows the parties to define how their assets/liabilities should be divided in the event of separation or death. Effectively, couples can come to any arrangement they like rather than the standard 50/50 split having regard to their own sense of fairness and justice.

The number of couples (both young and old, first relationships, or second) entering into prenups has increased exponentially over recent years, with many partners looking to ringfence certain assets or liabilities in the event of a separation.

It is difficult to pinpoint the driving force behind this increase, although some say it is due to newer generations taking a more pragmatic approach to relationships – viewing coupledom as an economic contract rather than a binding of love.

The need for a “fair” agreement

To be enforceable, the contracting out agreement must meet certain requirements under the Act, including being fair. Fairness does not amount to equality, but is rather measured against the parties’ individual circumstances at the time that the agreement was entered into.

A contracting out agreement can subsequently be set aside if, having regard to all the circumstances, the Court is satisfied that giving effect to the agreement would cause serious injustice. The Court must have regard to:

• the provisions of the agreement;
• the length of time since the agreement was made;
• whether the agreement was unfair or unreasonable in the light of all the circumstances at the time it was made;
• whether the agreement has become unfair or unreasonable in the light of any changes in circumstances since it was made (whether or not those changes were foreseen by the parties);
• the fact that the parties wished to achieve certainty as to the status, ownership, and division of property by entering into the agreement;
• any other matters that the court considers relevant.

It is important to seek legal guidance from a qualified solicitor when negotiating and executing your contracting out agreement to ensure that it has the best chance of being upheld in the face of a future challenge. Amongst other things, the agreement should set out all the circumstances considered when determining how property is to be owned/divided upon separation, and why the parties consider the arrangement is fair (particularly in cases where there is unequal sharing).

Regular reviews help ensure the agreement stays “fair”

It doesn’t stop there. Contracting out agreements should be treated as a living document. The reason being that these types of agreements can become unfair over time if they are not regularly reviewed and updated to align with the parties’ particular circumstances as they enter different phases of their lives and relationship. For example, in the event of children, marriage, serious illness, periods of unemployment, etc. On occasion, contracting out agreements can contain in-built mechanisms for property rights to change upon important events occurring.

The key takeaway here is that if a contracting out agreement is not regularly reviewed and updated, it becomes vulnerable to challenges. This is especially so when the contracting out agreement favours one party more than the other. Regular reviews also help couples to be able to rely on the certainty of their arrangements.

For example: if a couple were together for twenty years and upon separation their prenup (entered into 20 years prior) stipulated one partner was to receive a car while the other was to receive the family home, it could potentially be overturned if it were deemed to be seriously unjust. However, if the prenup has been continuously reviewed, the reasons for the arrangements have been clearly set out, and the parties have indicated their consent to this ongoing arrangement at each review, then the prenup is more likely to stand up to a challenge as to fairness.

If you are looking for guidance on a new or existing contracting out agreement, contact our family law expert Natalie Miller by phone on 09 8376843 or email natalie.miller@smithpartners.co.nz to set up an appointment or complete the below form today.