Kevin Costner’s Pre-Nup – And its “In Terrorem” Clause

A couple of weeks in the past, we lined the upcoming celeb divorce of actor Kevin Costner and his spouse Christine Baumgartner. As has been extensively reported, the couple have been sensible sufficient to conform to a complete pre-nup earlier than they bought married; it addresses their monetary and different preparations now that they’ve determined to half methods.

Pre-nups are all the time a fantastic thought, no matter celeb (or non-celebrity) standing.  In fact the clauses will fluctuate with the actual couple, their general scenario, and their particular person wants and needs.

Based on some information sources, the Costner-Baumgartner version has an interesting clause:  If Christine decides to problem the pre-nup, then she’s going to forfeit the $1.5 million settlement she’d in any other case obtain. 

Reportedly their settlement stipulates that “If Christine, in any method, challenges or assists within the problem of the validity or enforceability of any provision of this Settlement, she shall lose any and all rights to obtain any cost, Property or Curiosity from Kevin pursuant to this Settlement.”

These sorts of clauses are referred to as “in terrorem” provisions, and they’re extra typically seen in industrial agreements.  In a Canadian attraction court docket ruling in Bobrowski v. Canadian Fireplace Insurance coverage Co., the court docket defines them as being “a situation … which is meant to frighten or intimidate”.   

Since they’re akin to penalty clauses, they are typically topic to particular scrutiny by the courts – particularly once they present up in home agreements just like the Costner-Baumgartner one.  Household Courts will uphold them in the event that they symbolize a real pre-estimate of the liquated damages the opposite social gathering will really endure because of the breach.  However they are going to be struck down if they’re designed to basically coerce or compel the opposite social gathering’s efficiency.

In a single Canadian Household Regulation determination referred to as Dundas v. Schafer, the court docket struck down a clause like this, because it presupposed to restrict one partner’s proper to problem her entitlement to the pension of the opposite.

In that case the husband and spouse had reached what the trial court docket discovered was a transparent and unambiguous separation settlement.  It included a provision through which the spouse agreed to waive or launch her curiosity within the husband’s pension. In return the spouse obtained – and was duly paid – $20,000 from the husband.  When the spouse later determined to problem the pension clause anyway, the husband thought-about it a breach of the in terrorem clause.  He requested for the cash again, and the trial decide granted him an order accordingly.

The Manitoba Courtroom of Enchantment overturned that ruling; the spouse might preserve the $20,000.  The clause was tantamount to an unenforceable penalty provision.  There was no relationship between its breach, and the quantity the husband had paid the spouse underneath it.  In different phrases, the $20,000 was not a real pre-estimate of damages the husband would endure if the spouse challenged the settlement, not to mention if she challenged the pension clause particularly.

Full textual content of the selections:

Bobrowski v. Canadian Fire Insurance Co., (1962), 35 D.L.R. (2d) 127 (Man. C.A.)

Dundas v. Schafer, 2014 MBCA 92, 2014 CarswellMan 598