KNOW YOUR LEGAL OPTIONS, RIGHTS AND OBLIGATIONS MAKE SURE YOUR SEPARATION AGREEMENT CAN BE ENFORCED BY THE COURT
You have a right to legal advice before signing an agreement and if you did not exercise this right, it may be grounds to have the agreement set aside. However, this right can be explicitly waived in the agreement. Legal representation is the best way to protect yourself and your family in the future. There are a number of risks that present themselves when drafting, negotiating or signing a domestic contract in Ontario without any legal assistance, advice or consultation.
Reasons a separation agreement may be set aside in the future include:
- A party signed under duress, coercion, undue influence
- The terms were grossly unfair or unconscionable
- Contract not properly drafted
- Lack of complete financial disclosure
- Failure to disclose a significant asset or debt
- An asset was not accurately valued
- A party did not understand the terms and consequences of the agreement
- A party did not have independent legal advice
NEVER sign any Agreement without first getting independent legal advice (ILA) from a family lawyer. Statistically DIY Agreements have a history of not standing in Court if your spouse challenges it later.
What are Domestic Contracts?
Domestic contracts are legal agreements entered into by parties in intimate relationships. These contracts enable the parties to set out the terms of their relationship to ensure the parties understand and have the same expectations with respect to what will happen if various situations occur and, generally, what their obligations are. There are three main types of domestic contracts: marriage contracts (or prenups), separation agreements and cohabitation agreements.
In Ontario, domestic contracts are governed by Part IV of the Family Law Act.
What makes a domestic contract valid?
Ontario Family Law states that for a domestic contract to be valid, it must be in writing, signed by the parties and witnessed, pursuant to section 55 of the Family Law Act.
Section 56(4) of the Family Law Act sets out three instances in which a domestic contract or a provision in one may be set aside.
- First, if there has not been full financial disclosure.
- Second, if one of the parties did not understand the nature or consequences of the agreement.
- Third, if the contract is not in accordance with the law. In addition to being bound by Ontario family law, these agreements are all contracts and as such, the law of contract also applies.
Four requirements for a legally valid contract according to Ontario contract law:
Legality: the contract must be enforceable at law, meaning, it does not create illegal obligations.
Mutual agreement: this means there must be an offer and acceptance of the offer where both parties understand and agree to the terms.
Consideration: this is either money or promises made in exchange for signing the contract.
Capacity: each party must be of sound mind and capable of understanding the full meaning and effect of the contract they are signing
Any contract, family law or otherwise, may be set aside if any of the following can be proven:
Misrepresentation: this is a false statement of fact made by one party in order to induce the other to enter into the agreement. If the misrepresentation is of a material (important) fact, it may render the contract voidable.
Mistake: this is where one (or more) of the parties had an incorrect understanding of what the contract meant or set out.
Duress or undue influence: this is present where a party compels, intimidates, coerces or threatens the other to enter into the agreement against their will. The party claiming duress or undue influence needs to prove that there was a threat and that that was the reason they made the contract.
Incapacity: those entering into an agreement must have the legal capacity with regard to age, mental capacity and authority.
Courts may also set aside provisions or entire contracts if they are grossly unfair. However, the longer a party waits (after discovering the unfairness) to go to court on an issue of unfairness, the harder the argument is to make.
Can I just use an online contract template?
Yes, you can, but do so at your own risk. There is no assurance or guarantee that these agreements are legally enforceable.
Do I need a lawyer for a prenup or separation agreement?
No, you do not need a lawyer to draft a domestic agreement or to register one with the court. However, it is strongly recommended to have the agreement reviewed by a lawyer so you are fully informed with respect to what you are agreeing to.
Separation agreements are written at the time of separation. They can be made between common law or married spouses. In addition to terms that deal with financial and property issues, this type of agreement can include terms that set out custody and access to the children as well as child support. However, the amount of child support set out in the contract must be reasonable, and this means it must conform to the Ontario Child Support Guidelines.
Separation agreements, negotiated privately between the parties, are an alternative to going to court. They can be used to address all issues that accompany divorce. However, since these agreements are the product of cooperation and negotiation between the parties, they are not advised in highly acrimonious separations, families where there was or currently is domestic violence.
Ontario marriage contracts are governed by section 54 of the Family Law Act.
Is my agreement valid if my ex forced me to agree?
If you can prove to a court that you signed the agreement against your will, the court may set it aside. However, the longer you wait to go to court, the more difficult it may be to prove your case.
What are grounds for setting aside a domestic contract?
There are a number of grounds for setting aside provisions of, or, the entire domestic contract including: a party did not sign of their own free will because of coercion/threats/undue influence, there was inaccurate financial disclosure, a party did not understand what they were signing, a party did not have independent legal advice before signing, the contract is grossly unfair, a party lacked the legal capacity to sign or the contract is not in accordance with the law.
There are rights and obligations parties are entitled to that they may not be aware of, and having a lawyer assist you through the negotiation process, or at least thoroughly reviewing the agreement, will ensure you are fully aware of your rights and entitlements.
Contract drafting is a highly technical activity and improper drafting can result in legally unenforceable provisions of or entire contract. The law of contract is nuanced and complicated and there are pitfalls that only legal professionals may be able to alert you to.
For instance, there is a legal principle followed in Ontario called Contra Proferentem, according to which, if a provision in a contract is challenged by a party for being unclear, the court will interpret it against the party who was responsible for drafting it. This means if you are the one drafting the contract and the other party challenges it for being ambiguous, the court will interpret it in the other party’s interest, as opposed to yours, or neutrally.
Another example is failing to include what is called a severance provision, this is a standard term that, when properly worded, provides that even if one term or provision in the agreement is found to be unenforceable by the court, the rest of the agreement is still binding. The simple oversight of not including this provision could very easily have your entire agreement void leaving you open to a large scale family law matter involving all issues.
The cost of a court proceeding to challenge the validity of the contract or a provision in it, or to make a change, can be quite high and it is best to ensure the agreement you sign is properly drafted and anticipates the most likely changes in circumstances in the future and provides for them in the agreement.
You have a right to legal advice before signing an agreement and if you did not exercise this right, it may be grounds to have the agreement set aside. However, this right can be explicitly waived in the agreement. Legal representation is the best way to protect yourself and your family in the future.
Prenups or Marriage Contracts
A marriage contract is essentially the same as a cohabitation agreement with the main difference being that a marriage contract is entered into in contemplation of marriage (just before marriage, this is sometimes called a ‘prenup’ or ‘prenuptial agreement’) or during the marriage. Once married, each party has a legal right to an interest in the matrimonial home. A marriage contract may include a term that stipulates a different share in the value of the home from the 50/50 default.
There are two important legal rights that a marriage contract cannot change. First, Ontario Family Law prevents one spouse from selling or mortgaging the matrimonial home without written permission of the other spouse. Second, the law also says separated spouses each retain a legal right to occupy the matrimonial home. A marriage contract cannot opt out or modify these rights/obligations. Ontario marriage contracts are governed by section 52 of the Family Law Act.
We did not have a marriage contract but we had a cohabitation agreement before we got married, is the cohabitation agreement still valid?
Unless there is language in the cohabitation agreement that says otherwise, in Ontario, generally, a cohabitation agreement automatically becomes the marriage contract up on marriage
A cohabitation agreement is made before or after the parties move in together. It addresses the terms of cohabitation and generally cover financial and property issues. These agreements are especially useful for setting out terms that specify what will happen in the event of separation.
Here are some of the specific issues included in a cohabitation agreement:
- Establishing the net worth of each party at the beginning of the cohabitation
- Whether finances will be kept separate or joined (ie. that the parties will maintain separate bank accounts or have a joint account for cohabitation expenses)
- How debts and assets will be divided upon separation
- Whether or not spousal support will be paid upon separation, by whom and how it will be calculated
When you get married, your cohabitation agreement automatically becomes your marriage contract (unless there is a term in the cohabitation agreement that opts out of this). Ontario cohabitation agreements are governed by section 53 of the Family Law Act.
How can a Family Lawyer Help?
A lawyer can help you with your domestic contract matter in a number of ways:
Long term needs assessment to identify provisions and specific language the contract should include
Review of your entitlements, rights and obligations
Review of your entitlements, rights and obligations
Reviewing financial disclosure
Certificate of Independent Legal Advice
Contract review & negotiating contract changes
Representation at motion to change or set aside the contract
What happens if you violate a domestic contract?
What happens if you violate a domestic contract?
The contract may include a provision that speaks to what happens in such circumstances, in which case, it is likely this provision will determine what happens. If there is no such provision, violating a domestic contract amounts to breach of contract and the other party may seek a remedy in court. If you breach a support provision of a domestic contract that has been registered with the Family Responsibility Office, they may take action against you to the same extent that they would if you breached support provisions of a court order.
How is a domestic contract enforced?
A domestic contract can be registered with the court. If it is registered, it will be enforced just like a court order would be enforced. If the contract provides for spousal and/or child support, by registering the agreement with the court, the Family Responsibility Office will also be able to enforce it just as it would enforce a court order for support and they will be able to take the same measures to collect support including garnishing a payor’s wages, suspending their driver’s license or initiating court proceedings.
Can a prenup or domestic contract be changed?
It is possible to include a dispute resolution clause in a domestic contract. For instance, a separation agreement may stipulate that mediation or arbitration is the agreed upon method of dispute resolution. If this is the case, this is the road to take to change it.
If there is no dispute resolution clause, you may still pursue alternatives to court, such as mediation or arbitration, in addition to court.
Should you and your partner be unable to come to a resolution with respect to the desired change, you may have no choice but to go to court.
Generally, it is difficult to persuade a court to vary a domestic agreement or prenup that is otherwise enforceable (meaning it is not invalid for the reasons outlined above). The court will review and analyze the contract in the context of the present circumstances and it may set aside or change (vary) the contract if it no longer reflects the intentions of the parties or for any other reason available to the court.
– If you are in a common law relationship and you have a cohabitation agreement, should you and your common law partner subsequently marry, the cohabitation agreement automatically becomes a marriage contract (unless the cohabitation agreement says otherwise).
– Spousal support can be addressed in a cohabitation agreement.
– A marriage contract cannot opt out of the legal right of each party to occupy the home or waive the requirement that the home cannot be mortgaged or sold without the consent of the spouse.
– A marriage contract can set out a different division of the value of the matrimonial home from the default 50/50.
– A separation agreement can include terms that govern child custody and access and child support.
– A court may vary the child support provisions of a separation agreement if the support amount is unreasonable in light of the Child Support Guidelines.
– A domestic contract must be witnessed, signed by the parties and in writing for it to be valid.
– A domestic contract is invalid if the parties did not enter freely into the agreement or if they did not fully understand what they were signing. The party claiming invalidity is the one who has to prove it..
– A domestic contract can be set aside if the court deems it to be grossly unfair.
– A domestic contract can be registered with the court and becomes as enforceable as a court order.
– A domestic contract may be set aside if there is incomplete or inaccurate financial disclosure.
– A court may change a domestic contract if it no longer reflects the intentions of the parties in the present circumstances.
– Without a family lawyer to, at the least, review the contract, you may be signing away rights and entitlements that you cannot get back.