Do you read every contract before you sign it? The whole thing? If you don’t, you’re not alone. It’s a pretty well-known fact that most people sign contracts without reading them carefully—or reading them at all. And this applies to ALL types of contracts, believe it or not!
The website ProPrivacy.com conducted an experiment to see how carefully people read online contracts. As part of the experiment, they asked survey respondents to go through an online transaction and then asked them if they had read the terms of service. An astounding 70% of people said they read the agreement, with 33% saying they “read it thoroughly.”
But they knew that reading everything was probably the most boring thing ever, and that technical language was just too much! Besides, you must accept the terms for that new app—because if you don’t “accept,” then no app!
In a somewhat unusual survey, it turns out 99% of the people agreed to the terms of service which included giving up the right to name their firstborn child, granting access to the airspace above their property for drone traffic, and allowing their mother to have full access to their internet browsing history! Now that’s funny, don’t you think? Unless, of course, you don’t care if your mom sees your personal information.
Even if your comprehension skills are impressive, reading through a contract and all of its legal jargon can be daunting. Perhaps this is why some people prefer to pass along the responsibility of contract review to their attorneys.
Is that a smart decision? Many of us were told by wise parents at a young age never to sign anything without reading every single word first. That’s still good advice. Even if your attorney prepares or reviews an agreement, it’s YOUR name at the bottom because YOU are the one on the hook for everything in that contract.
When it comes to reviewing prenuptial and postnuptial agreements, we can learn quite a lesson from the McCourts. Who are they, you might ask? Well, here’s a brief summary regarding a prenuptial agreement that contained terms regarding ownership of the LA Dodgers.
The LA Dodgers Divorce
You may remember a story in the news a few years back about the divorce between the owner (or owners?) of the Los Angeles Dodgers. Believe it or not, the question of ownership was hotly contested—because of their postnuptial agreement! Here’s what happened (and why you should care).
Frank and Jamie McCourt were married in 1979 after meeting in college. They both created successful careers for themselves—Frank in real estate and Jamie in law.
In 2004, Frank made a big purchase: $421 million for the Los Angeles Dodgers, the stadium, and the surrounding acreage in Chavez Ravine. Around this same time, the couple had been working with Frank’s attorney on estate planning and had been discussing the possibility of creating a postnuptial agreement. They had different motivations–Jamie had expressed concern about protecting their personal assets from business creditors while Frank was particularly concerned about protecting his interest in his newly acquired team and land.
The couple asked their attorney to draw up a postnuptial agreement (or MPA – Marital Property Agreement). On March 31, 2004, the attorney presented six copies of the agreement, all of which Jamie signed. Frank signed only three copies that day, and then signed three copies two weeks later on April 14. (This is NEVER good practice to do, by the way–both parties should sign together.)
Just five years later and after 30 years of marriage, Jamie filed for divorce in California. A trial was held to determine whether the postnuptial agreement would be enforced. The verdict: the agreement was unenforceable!
Frank and Jamie both admitted in court that they hadn’t read the agreement carefully before signing, and both trusted the attorney had created the document according to their wishes.
But it turns out the attorney had done something not just shady–but illegal—by making changes to the agreement after Jamie had already signed. The three copies Frank signed on April 14 were different from the original six copies Jamie had signed two weeks earlier. When Jamie signed, the agreement listed Frank’s separate property but did not include the Dodgers and the associated land on the list, but the last three copies signed by Frank included the team and land in the list of his separate property. If Jamie had signed that version of the agreement, she would have been agreeing to give up her stake in those assets and making Frank the sole owner—something she claimed she never would have done.
In order for any contract–including a postnuptial agreement–to be enforceable, it must demonstrate that there has been a “meeting of the minds,” meaning both sides have the same understanding of what the agreement stipulates. The court determined in this case that there could not possibly have been a meeting of the minds when there were two different versions of the agreement.
The McCourt divorce illustrates the importance of ensuring you’re working with a trustworthy lawyer (actually California requires two attorneys so that each person has independent representation) when putting together a prenuptial or postnuptial agreement, as well as emphasizes the wisdom of the advice to read everything before you sign.
Incidentally, in case you’re wondering how things shook out for the McCourts, here’s how it ended. One year after the 2010 trial, the couple reached a settlement where Jamie agreed to take $131 million plus about $50 million in property. It probably seemed like a good deal to her at the time, as the Dodgers were in bankruptcy, and holding out for the value of the team to appreciate down the line would have been a gamble.
The gamble would have paid off though. When Frank sold the Dodgers for $2.15 billion a few years later, Jamie must have tasted sour grapes because she attempted to have the settlement overturned. By then, however, it was too late. Her claims that Frank had misled her about the value of the team and the property were dismissed by the judge—who also ordered Jamie to pay $1.9 million in legal fees.
There’s another lesson here too, then—a signed agreement is a signed agreement and courts don’t take kindly to what they perceive to be frivolous legal action. Jamie took the sure payout rather than gamble on the valuation of the team, and she lost that bet. But as they say, a bird in the hand is worth two in the bush. . .and if you get one bird, don’t ask a judge to give you two birds later!
The Bottom Line
A prenuptial or postnuptial agreement can save both parties unnecessary time, money, and stress, but care must be taken to review documents carefully. It is advisable for both parties to have their own attorneys if you want the agreement to actually have a chance of being enforceable by the court, and it is certainly recommended that both the attorneys and the parties review the agreements carefully prior to signing them. I mean, really, why spend all that time and money getting a premarital agreement if the court is going to just toss it in the trash?
It is also worth noting that the existence of an agreement doesn’t necessarily mean you’ll avoid the courtroom if you get divorced. It should make the process much smoother and easier though, and for the few remaining issues that may need to be ironed out, you can work those out in mediation or through a collaborative divorce process.
High profile divorces provide interesting and poignant illustrations of what can go wrong with a sloppily prepared prenuptial or postnuptial agreement, as well as if you have an unscrupulous attorney, but you don’t have to be rich or famous to learn from their mistakes. Let this story be a useful cautionary tale.
If you would like to explore the possibility of creating a valid prenuptial or postnuptial agreement with an experienced, conscientious, and careful attorney, plan to schedule a consultation at least three months before your intended wedding date. Then put that original document in a safe place and take really good care of your relationship so you never have to look at it again.
If you have questions, please give my office a call anytime to schedule an initial consultation.