In the twenty first century many couples are entering into Antenuptial Contracts in order to protect their individual assets and restrict their exposure to liabilities brought on in terms of solemnizing a marriage or civil union in community of property.  One should understand the specific liabilities that you might be exposed to when concluding a marriage in community of property. Similarly one should be aware of the requirements that must be met when deciding to sign an Antenuptial Contract.  

Antenuptial Contracts

Firstly, what is an Antenuptial Contract? An Antenuptial Contact (“ANC”) is:

Ante                             –          meaning before;

Nuptials                       –          the vows taken solemnizing a marriage or civil union; and

Contract                      –          an agreement, in this case between two parties.

An agreement made between two potential spouses before they are married or enter into a civil union with one another. An ANC determines the matrimonial regime you and your potential spouse will be entering into and the marriage solemnized under it.  The purpose of signing the ANC is    to change the marital regime from being automatically married in community of property to being married out of community of property, with or without the accrual system.

In Community of Property

This is the matrimonial regime entered into when there has not been an ANC concluded between the couple. All assets and liabilities (even those acquired before the marriage) are merged into a joint estate in which each spouse has an undivided half-­‐share and a right to and dispose of the joint assets.

Assets and Liabilities

The assets of the couple before getting married to one another and those accumulated during the subsistence of the marriage or civil union form part of the joint estate. There are however certain exceptions thereto. Assets left to a specific spouse in accordance with a Last Will and Testament stipulating that the assets are precluded from the joint estate or an amount paid in terms of pain and suffering of a specified spouse in accordance with a   Road Accident Fund claim will not form part of the joint estate.

The liabilities incurred by the spouse prior to marriage or civil union or during the subsistence of the marriage or civil union are liabilities of the joint estate. The spouses are therefore jointly liable for the debt. This rule applies to contractual debt, maintenance payment for ex-­‐spouses or children, car loans, personal loans, credit card payments, bonds, rental and any other form of accumulated debt.

Capacity of the Spouses

A spouse has the capacity or authority to carry out certain actions in terms of the joint estate without their spouse’s consent., However there are instances where consent is required from ones’ spouse in varying forms to encumber the joint estate in terms of the Matrimonial Property Act No. 88 of 1984, as amended. The specific instances where consent is not required and what form of consent is required for certain actions can be quite tricky to circumnavigate.

Consent not required

• making deposits at a banking institution;
• making donations to third parties that do not prejudice the other spouse;
• forming a company or trust;
• entering into a transaction on the stock exchange;
• entering into a contract in the ordinary course of his/her business;
• selling certain movable assets, such as a car; and
• performing transactions in the course of his/her business, trade or profession.

Informal consent required

In certain instances, informal consent from one’s spouse is required wherein in oral consent is sufficient. The following types of transactions fall into this category:

• receiving money that is due to the other spouse, from sources such as:
• an inheritance, donation or prize;
• remuneration, bonuses, allowances, earnings, a pension, a gratitude for services rendered or by virtue of their profession, trade or business, or damages awarded for the loss of income from any of the aforementioned sources;
•   income from his/her separate property, for example rent money earned from renting an immovable property;
• dividends or interest on investments in their name; and
• the proceeds of an insurance policy.
• the alienation or burdening (i.e. selling and pledging) of common household furniture, such as washing machines, stoves, bicycles or pets; and
• donating from the joint estate where the donation unreasonably prejudices the interests of the other spouse, such as donating furniture from the common household.

Written consent required

The following acts may only be performed with the written consent of one’s spouse:

• alienating or burdening assets of the joint estate, kept mainly for investment purposes, such as stamps, works of art, jewelry or coins;
• alienating, ceding or burdening insurance policies, mortgage bonds, fixed deposits, shares, stocks or any of the other spouse’s investments at any financial institution; and
• withdrawing money from any account held in the name of the other spouse.

Written consent with two witnesses required

The following acts may only be performed with the written consent of one’s spouse as co-signed signed by two witnesses:

• alienating immovable property, such as a house, townhouse or farm, belonging to the joint estate;
• entering a credit agreement in terms of the National Credit Act 34 of 2005; and
• entering into a contract to purchase immovable property.
• Prior written consent with two witnesses required

In some instances, a spouse must give their consent prior to the transaction. It cannot be ratified later. The following acts may only be performed with the prior written consent of their spouse and co- signed by two witnesses:

entering into a contract of surety, where one party binds the communal estate as a surety for debt of a third party; and

the actual alienation or burdening of immovable property belonging to the communal estate or the actual granting of the rights (selling or giving a third party a share in the property) over such immovable property.

Consequences of none consent

When a spouse enters into a transaction requiring a spouse’s consent and same is not obtained, our law favours the rights of the third party with whom the spouse contracted. If the third party doesn’t know or can’t reasonably have known that consent wasn’t given, then the transaction is valid. The law does however provide the innocent spouse some protection. When the joint estate is divided at the end of the marriage or civil union, the Court will make an adjustment and the innocent spouse will be compensated accordingly.

Suing for Damages

Spouses in community of property cannot sue each other for damages. It would be pointless as money taken from the joint estate to pay the one spouse will simply fall back into the joint estate.

There is an exemption to this rule however, a spouse can sue the other for non-­‐financial loss arising out of bodily injuries caused by the other spouse. For example, if the spouse is a passenger in a car driven by her husband/wife/life partner and due to their negligent driving, they are involved in a car accident, the spouse could sue for pain and suffering as this is considered to be non-­‐ financial loss. The injured spouse could sue for medical expenses, since this would be financial loss due to pain and suffering experienced. Damages that are recovered in respect of the non-­‐financial loss (damages paid to for pain and suffering) will fall into their own estate, outside the joint estate.

Insolvency

One of the most devastating consequences of a marriage in community of property is that when one party becomes insolvent (cannot pay his/her debts), both parties will be declared insolvent, because there is one joint estate. If there is a Court Order against either one of the spouses, the joint estate will be affected.

Conclusion

It is essential to know and understand the specific liabilities and the requirements when exercising your rights in terms of the joint estate. Knowledge of this type of marital regime would provide a better basis from which to decide on the best marital regime to protect the assets and interests of the spouses or life partners and whether to enter into an ANC.

Written by Peter McRae-Samuel, Junior Associate, Attorney and Notary Public, Schoeman Law

Contact SchoemanLaw Inc for expert legal advice on drafting ANC