Written on behalf of Shariff & Associates
In today’s world, people have a significant amount of freedom regarding the arrangements they can make in familial matters. An example of this flexibility is a marriage contract, also known as a domestic contract in Ontario. This blog will discuss the purpose of such agreements and the grounds under which the courts could invalidate them. Further, this blog will explore a recent case before the Ontario Superior Court of Justice which revealed several factors a judge will consider to be persuasive when deciding whether or not to invalidate a marriage contract.
In Ontario, marriage contracts, also known as domestic contracts, are legal instruments that define the rights and obligations of spouses in a marriage. Governed by the Family Law Act, these contracts enable couples to customize financial arrangements, property division, and support matters before marriage. The Court has the power to vary the contract, but as will be demonstrated, the Court will rarely interfere with their terms.
The common law has developed general principles to guide a court’s analysis with respect to setting aside marriage contracts. These principles include:
- As a general rule, courts will uphold the terms of a valid, enforceable domestic contract.
- It is desirable that parties settle their own affairs and courts are generally unwilling to set aside domestic contracts.
- Parties are expected to use due diligence in ascertaining the facts underlying their agreements.
- A domestic contract will be set aside when a party was unable to protect his or herself.
- The court is less likely to interfere when the party seeking to set aside the agreement is not the victim of the other, but rather his or her own failure to self-protect.
- The court must not look at which party made the better bargain but rather, to whether one party took advantage of their ability to make a better bargain.
- The test for unconscionability is not weighing the end result, but rather the taking advantage of any party due to the unequal positions of the parties.
- The onus is on the party seeking to set aside the domestic contract to demonstrate that the marriage contract must be set aside.
In Singh v. Khalill, the Court considered the above factors, as well as contract first principles, when considering whether a marriage contract should be set aside. The parties met in 2016, and four weeks later, they were engaged. Six weeks after that, they were married. The parties had both been married before and had children from other marriages/relationships. The husband owed child support in British Columbia.
Not long after their marriage, problems began to occur. The wife was upset with the husband’s lack of financial contribution to the relationship. She eventually suggested that they enter into a marriage contract so that she could protect her assets should the relationship fall apart. She had a lawyer draft a contract and alleged that she brought it home and provided a copy to the husband in January 2017.
The parties disputed the timeline of when the draft marriage contract was provided to the husband.
In any event, the husband testified that he did not review the contract before he agreed to sign it. The parties finalized and executed the marriage contract at a lawyer’s office in March 2017. As part of the execution, the lawyer signed a Certificate of Acknowledgement confirming that the husband understood the agreement and entered into it voluntarily. The agreement also included a financial disclosure document listing the properties the wife owned.
The parties subsequently acted in accordance with the marriage contract, specifically keeping their finances separate. However, after the disagreements between the parties persisted, the wife eventually filed and was granted a divorce order in May 2021. The husband brought an application to set the marriage contract aside and equalize the assets.
The Judge ultimately found that the marriage contract was valid and dismissed the husband’s application. The Judge noted that the husband had pre-existing experience with legal proceedings and did not have trouble understanding contracts. The Judge was not persuaded by his argument that he did not read the contract, as he had every opportunity and no reason not to.
Therefore, the Judge found that the marriage contract was not unfair or the result of unequal bargaining power. The Judge noted that the starting point is that courts should resist interfering where parties are settling their own terms. The husband’s lack of due diligence does not enable the Court to set aside the agreement as there was no financial vulnerability on the husband’s part, nor was there improper actions on the wife’s part. The Judge found that this was a case where “a party cannot fail to ask the correct questions and then rely on a lack of disclosure.”
This case indicates how the courts treat marriage contracts and the factors they consider to invalidate them. Importantly, it must be noted that a party’s lack of due diligence will generally not be a persuasive argument to set a marriage contract aside.
At Shariff & Associates in Whitchurch-Stouffville, our experienced family lawyers work closely with each client to ensure they have a full appreciation of each client’s needs and goals before drafting or reviewing a marriage contract or other domestic contract. We draft and negotiate terms to protect our clients’ rights and ensure clients have a thorough understanding of each term before signing any document. To speak with a member of our team regarding your domestic contract, please reach out to us online or call our office at 905-591-4545.