Contracting Out Agreements: The Importance of Getting it Right

3 Jun 2025

What is a Contracting Out Agreement?

A Contracting Out Agreement, also commonly referred to as a “pre-nup”, is an agreement entered into under the Property (Relationships) Act 1976 (Act). These agreements enable parties who are in, or contemplating entering into a de facto relationship, civil union, or marriage, to contract out of the default provisions of the Act. By contracting out of the Act couples can create their own agreements for property ownership and, in particular, division of property, in the event of separation or death of one of the parties.

Who Should Consider a Contracting Out Agreement?

Whilst formerly viewed as agreements entered into only by the rich and famous it has become increasingly common and advisable for Contracting Out Agreements to be considered and entered into by everyday people, for example:

• Young couples purchasing their first home will benefit from a contracting out agreement if they want to protect their differing initial contributions towards the purchase of their first home or funds are being loaned by one party’s parents; and
• Couples who have previously been in a long-term relationship who wish to keep all property and finances separate in their new relationship, particularly where there are children to a previous relationship and there is a need / desire to identify particular property as being separate for the protection of those children.

Research of Otago University scholars Nicola Taylor and Megan Gollop revealed that 84% of Contracting Out Agreements are fully or partially followed on separation. Findings highlighted that when separating, parties generally consider that the existence of a formal Contracting Out Agreement assisted with providing greater clarity and certainty, removed stress and conflict and, even if not fully followed, provided a useful starting or fall-back position for negotiation.[1]

Key Considerations

• The age and stage of each of the couple.
• Whether there are, or anticipated to be, children to the relationship and whether there are children to any prior relationships.
• What the parties intend to happen in the event that one of them dies before the other.
• How the parties wish for their assets and liabilities to be divided in the event of separation.
• Whether either party has an interest in a trust, partnership or company and / or is a sole trader.
• What debts each party has.

What is Required to Enter into a Legally Binding Contracting Out Agreement?

Contracting Out Agreements must meet certain criteria under the Act to be legally binding. One of the most important requirements is that each party must receive independent legal advice, which not only involves advice in respect of the merits and wisdom of entering into (or not entering into) the Agreement but also the party’s individual circumstances.

Thorough consideration must be given to asset holding structures and how asset holding structures may evolve over time. Full and accurate disclosure of all assets and liabilities held by each party, and by the parties together, is crucial, in order for the Contracting Out Agreement to correctly address the parties’ interests, how they are held, and what the parties agree in respect of such interests.

Contact Us for Assistance

Specialist advice from a lawyer with expertise in relationship property law is critical for the Contracting Out Agreement to stand the test of time. To discuss whether a Contracting Out Agreement would be beneficial for you, please reach out to the team at Martelli McKegg.