CONTENT OF MARRIAGE CONTRACTS

A man and a woman who are married to each other or intend to marry may enter into an agreement in which they agree on their respective rights and obligations under the marriage or on separation, on the annulment or dissolution of the marriage or on death, including:

1. ownership in or division of property;
2. spousal support obligations;
3. the right to direct the education and moral training of their children, but not the right to custody of or access to their children; and
4. any other matter in the settlement of their affairs.

FORM OF CONTRACT

A domestic contract or an agreement to amend or rescind a domestic contract is unenforceable unless made in writing, signed by the parties, and witnessed.

RIGHTS RE: MATRIMONIAL HOME EXCEPTED

Part II of the Family Law Act creates special rights with respect to a matrimonial home. Every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home. Provided that the definition is satisfied, residences such as the city house, the country cottage, and the Florida condominium could all qualify as matrimonial homes.

Part II of the Family Law Act provides that each spouse has an equal right of possession of any matrimonial home. The statute also provides that neither party can sell or mortgage a matrimonial home without the written consent of the other spouse.

A provision in a marriage contract purporting to limit a spouse’s rights under Part II (matrimonial home) is unenforceable.

CONTRACT SUBJECT TO BEST INTERESTS OF CHILD

In the determination of a matter respecting the support, education, moral training, or custody of or access to a child, the court may disregard any provision of a marriage contract pertaining to the matter where, in the opinion of the court, to do so in the best interests of the child.

SETTING ASIDE DOMESTIC CONTRACT

A court may, on application, set aside a domestic contract or provision in it:

1. if a party failed to disclose to the other significant assets, or significant debts or other liabilities; existing when the domestic contract was made;
2. if a party did not understand the nature or consequences of the domestic contract; or
3. otherwise in accordance with the law of contract.

FAILURE TO DISCLOSE

A failure to make full financial disclosure may entitle the other spouse to avoid the contract. We recommend that each party prepares a current statement of assets and liabilities and that both statements be appended to the marriage contract before it is executed. In preparing your net worth statement, it is critical that it be both complete and reasonably accurate. If you are in doubt as to the value of particular assets, you may wish to indicate a range of estimated values. We would encourage you to obtain whatever valuations (of real estate, business interests, pensions or chattels) that you may require in order to have confidence that your net worth statement is complete and accurate. You should include particulars of any assets that you expect to receive in the reasonably foreseeable future. The obligation to disclose is a positive one and is not dependent on the other spouse’s request. You cannot contract out or waive this obligation.

UNDERSTANDING THE NATURE AND CONSEQUENCES OF THE CONTRACT

In order to ensure that both parties understand the nature and consequences of the contract, we insist that both parties have independent legal advice. Each party should choose and pay the fees of his or her own solicitor. Before executing the agreement, each party will meet with his or her own solicitor who will explain the contents of the contract, review the financial disclosure, answer any questions or concerns, satisfy himself or herself that each party is signing freely and without undue influence or duress, and will execute the certificate to that effect. The requirement if independent legal advice cannot be waived.

COMMON LAW CONTRACTUAL REQUIREMENTS

Like any contract, a marriage contract can be attacked on the basis of improper conduct by either party, either at or prior to the execution of the agreement. Such grounds for attack include the following:

1. Duress: a wrongful act or threat by one party which deprives the other of the exercise of his or her free will;
2. Undue influence: the abuse by one in whom a confidence is reposed by another of such confidence or authority for the purpose of obtaining an unfair advantage over the latter;
3. Fraud: a false representation of a matter of fact, whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that the latter acts upon it to his or her legal detriment;
4. Unconscionability: where the terms of the agreement are so one-sided as to oppress one party or unreasonably favour the other;
5. Fundamental Breach: a breach by one party of a fundamental term of the agreement which warrants relieving the other party from further performance;
6. Other Equitable Grounds: The validity of a marriage contract may also be called into question on the grounds of inequality of bargaining power, unfair surprise, mistake, or material misrepresentation or non-disclosure.

ABANDONMENT

Courts have on occasion found that parties have by mutual consent (and by their conduct) abandoned or rescinded an agreement. Although our standard marriage contract provides that any amendment to this contract will be unenforceable unless made in writing and signed by each party before a witness, a court could nonetheless find that the parties have by mutual consent agreed to abandon some or all of their written agreement.

SETTING ASIDE SUPPORT PROVISIONS IN A MARRIAGE CONTRACT

The Family Law Act provides that a court may set aside a provision for support or a waiver of the right to support in a marriage contract and may determine and order support even though the contract contains an express provision excluding the application of this section:

1. if the provision for support or the waiver of the right to support results in unconscionable circumstances;
2. if the provision for support is in favor of, or the waiver is by or on behalf of, a dependant who qualifies for allowance for support out of public money; or
3. if there is default in the payment of support under the contract or agreement at the time the application is made.

As a result, a provision in the marriage contract either limiting or precluding a claim for future support is very much subject to the discretion of the court at the time an application for support is made. As yet, we have no reliable definition of what "unconscionable circumstances" means in this context.

FAIRNESS OR ADEQUACY OF TERMS

Because the use of marriage contracts is a relatively new phenomenon in Ontario, there has been little case law to date regarding the enforceability of marriage contracts. As a result, it is difficult to predict to what extent our courts will feel bound by the terms of a contract in the event they are presented with a claim for relief that is inconsistent with the terms of such a contract. In the United States, where similar contracts have been in use for many years, many courts have reserved the right to examine the agreement, particularly the property provisions, for unconscionability at the time of execution and for unfairness or inequity at the time of enforcement. If the circumstances at the latter date so exceed the contemplation of the parties at the time of making the agreement that enforcing the agreement for one party would work a fundamental injustice for the other party, some U.S. courts have declined to uphold the agreement. Whether or not Ontario courts will follow a similar approach is speculative at this time. In exercising its discretion, a court would likely consider three elements:

1. willingness (that is, was the agreement entered into on a voluntary basis, did the party understand it, how long before entering into the agreement was the other spouse shown the agreement, was the agreement freely negotiated or were it’s terms dictated by one party, was the agreement executed on the eve of, or shortly before, the wedding, and so on);
2. fairness (that is, compare the results under the agreement with those under the statute if an agreement had not been executed);
3. good faith (that is, was there full disclosure, etc…).

Whether or not a court will enforce a marriage contract will likely depend on all of the facts and surrounding circumstances, both at the time of execution of the contract and at the time of its proposed enforcement. As a result, one cannot give any guarantee that a contract today will be enforced by a court many years from now.

CONFLICT OF LAWS

The Family Law Act, 1986 provides that the property rights of spouses arising out of the marital relationship are governed by the internal law of the place where both spouses had there last common habitual residence or, if there is no place where the spouses had a common habitual residence, by the law of Ontario. If you presently have, or if you acquire in the future, ties to a jurisdiction other than Ontario, it is possible that you or your spouse may acquire rights or obligations under the laws of that jurisdiction. While your marriage contract will attempt to deal with all assets, wherever located, and rights and obligations anywhere in the world, such provisions may not be enforceable in other jurisdictions. We do not have the expertise to advise you regarding the laws of another jurisdiction. If you feel that such issues may arise in your case, we recommend that you obtain proper independent legal advice from a lawyer who practices in whatever other jurisdiction(s) may be relevant in your case.

NON-DEDUCTIBILITY OF SUPPORT PAYMENTS

The Income Tax Act provides that certain periodic payments made for spousal or child support pursuant to the terms of a court order or separation agreement are deductible to the payer and taxable in the hands of the payee for income tax purposes. However, similar payments made pursuant to the terms of a marriage contract do not satisfy the requirements of the Income Tax Act and are therefore not deductible to the payer or taxable in the hands of the payee.

FUTURE CHANGES IN LEGISLATION

Prior to 1978 when the Family Law Reform Act was enacted, Ontario law generally considered marriage contracts to be unenforceable on the ground that they were contrary to public policy. This rule of common law was overridden by the provision in the Family Law Reform Act (now continued in the Family Law Act) which specifically allows for marriage contracts. While it may be unlikely, there is always a possibility that future governments will either amend or repeal the current legislation, the result of which may be to either limit or altogether preclude reliance on marriage contracts. As a result, you would be well advised to keep informed as to future changes in the law, particularly those that may affect the enforceability of your contract.

CHANGES IN YOUR PERSONAL CIRCUMSTANCES