There are often negative connotations associated with marriage contracts. Many people have the preconceived notion that parties who enter into a marriage contract will ultimately end up divorced. Marriage contracts are often associated with mistrust, greed, and lack of commitment. In reality, they are important tools that provide couples with the autonomy to determine how certain issues are resolved upon separation, rather than deferring to what is set out in the legislation.
What is a Marriage Contract?
Commonly referred to as prenuptial and postnuptial agreements, marriage contracts are voluntary agreements between two individuals that define how certain issues will be resolved if the marriage ends. Namely, it can deal with things such as ownership, division of property, and spousal support. A marriage contract can be entered into either before (a “prenup”) or after marriage (a “postnup”).
Marriage contracts ensure predictability by knowing how assets and debts will be divided should the marriage end. They define the parties’ expectations from the outset and force them to have open and honest conversations about their financial circumstances, responsibilities, and expectations throughout the marriage. They also allow the parties to make informed decisions regarding their career, dividing household duties, and caring for the children.
For a marriage contract to be enforceable, it must be in writing, signed by both parties, and witnessed by an individual with capacity who is over the age of 18 [1].
What Can’t be Addressed in a Marriage Contract?
A marriage contract cannot deal with parenting issues related to your children, such as parenting time and decision-making responsibility. Those decisions must be dealt with at the time of separation and are decided based on what is in the children’s best interests [2]. Moreover, the court may disregard any provision of the marriage contract dealing with the support of children where that provision is unreasonable having regard to the Child Support Guidelines [3].
Although a marriage contract can deal with whether or not the value of the matrimonial home will be shared between the parties, it cannot interfere with either partner’s equal right to reside in the matrimonial home after separation [4].
Ensuring Enforceability
Section 56(4) of the Family Law Act sets out the circumstances in which the court may set aside a domestic contract:
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract.
1. Failure to Provide Full Financial Disclosure
Failing to make full financial disclosure could lead to the marriage contract being set aside. Both parties have a positive obligation to disclose all assets, debts, and income. This requirement is mandatory and cannot be waived.
2. Failure to Understand the Nature of Consequences of the Contract
To ensure that both parties understand the nature and consequences of the marriage contract, it is important that they obtain independent legal advice. This means that both parties meet separately with their own lawyer, who will explain the contents of the contract, review the financial disclosure that was provided, and answer any questions. The lawyer will also ensure that there is no undue influence or duress and that the terms are fair, reasonable and in accordance with the law.
3. Failure to Comply with the Law of Contract
Among others, a marriage contract can also be set aside on the following grounds:
(a) Undue influence – where there were circumstances of pressure, oppression, or other vulnerabilities that were exploited by one of the parties during the negotiation process.
(b) Duress – where a party acts on the wrongful act or threat of the other which deprives them of the exercise of their free will.
(c) Unconscionability – where the contract unreasonably favours or oppresses one of the parties.
(d) Fraud – where a false representation is made by one party to deceive the other, and that party relies on that false representation to their detriment.
In Le Van v Le Van, the Ontario Court of Appeal confirmed the two-step test for setting aside a domestic contract. First, the Applicant must show that at least one of the circumstances of section 56(4) of the Family Law Act is present. They will then have to show that it is appropriate for the court to exercise discretion to set aside the agreement [6].
Marriage contracts can become quite complex. To avoid falling victim to the many pitfalls that can render a marriage contract unenforceable, it is advisable to seek legal advice. At Northern Law, we have lawyers ready to assist you every step of the way. Contact us today at (705) 222-0111 or info@northernlaw.ca.
[1] Section 55of the Family Law Act, RSO 1990, c F.3 [2] Section 56(1)of the Family Law Act, RSO 1990, c F.3 [3] Section 56(1.1)of the Family Law Act, RSO 1990, c F.3 [4] Section 19of the Family Law Act, RSO 1990, c F.3 [5] Section 56(4)of the Family Law Act, RSO 1990, c F.3 [6] LeVan v. LeVan, 2008 ONCA 388.