Posted on 30.5.12 by Andrew Curwen
In 2010 the Supreme Court made legal history by recognising Prenuptial Agreements under British divorce law for the first time. The Judges found in favour of German heiress Katrin Radmacher, who had sought to protect her £106 million fortune in the event of a marriage breakdown. After the hearing, Radmacher said:
“In my homeland these agreements are entirely normal and routine. We made a promise to each other that, if anything went wrong between us, matters would be dealt with in the proper way.”
What Ms Radmacher might have (but did not) add is that ‘Prenups’ between parties contracting in a commercial context are not just “normal and routine”, they are entirely sensible.
Of course, commercial parties do not refer to their agreements as being Prenups; instead they are referred to as contractual termination provisions.
In 2010, at around the time that Ms Radmacher’s Prenup was hitting the headlines, Alstom Power Limited and Somi Impianti SRL were in the process of being wed together in relation to a mechanical and piping erection subcontract regarding the construction of a substantial power plant in Pembrokeshire,Wales. With Ms Radmacher’s experience (no doubt) firmly in mind, Alstom and Somi gave some consideration to what would happen to the offspring of their union (critical documentation regarding erection completion certificates, piping and instrumentation diagrams, as-built and pipe support drawings, welding records, etc) in the event that their marriage came to a premature end.
Unfortunately, Somi turned out to be a rather unreliable spouse and the parties fell into dispute regarding a range of issues; including culpability for delayed completion (which was the subject of at least two Adjudication proceedings).
Just as the parties’ positions became irreconcilable, Somi sought to deny Alstom access to the critical documentation referred to above. This behaviour was, no doubt, intended to exert maximum commercial pressure on Alstom to secure a more favourable exit to the relationship for Somi.
Alstom immediately filed for divorce. It implemented the contractual termination procedure and commenced proceedings to secure custody of the critical documentation. Mr Justice Akenhead concluded that Alstom had more than adequate grounds for divorce and that it had correctly applied the contractual termination procedure and, more importantly, that the sub-contract provided that title to the critical documentation had vested in Alstom and that Somi was contractually obliged to hand it over.
The lessons are clear. Whilst there is some delicacy required in terms of negotiating such things during the honeymoon period, any party entering into a commercial arrangement should give some thought to the possibility of a premature end to that relationship. Well thought out provisions regarding ownership/handing-over of project documents, equipment and materials can be invaluable should the worst happen.
Even if an effective Prenup is in place, bringing a contract to an end is still one of the most legally fraught steps that a contracting party is likely to encounter. Failure to implement the process properly could place the ‘innocent party’ in repudiatory breach or, even worse, deprive that party of one half of its prized Beatles album collection.