What are domestic contracts?

hands on a book

Domestic contracts are legal agreements entered into by people wishing to set their own terms in their relationships with one another and include cohabitation agreements, marriage contracts and separation agreements.

To be legally binding, the contract must be in writing and signed by each person in the presence of a witness.  The contract will not be enforceable if either party has coerced the other into signing or has failed to provide complete financial disclosure.

While it is hard to persuade someone in the early days of a relationship that they may need protection later, if the relationship goes bad, a good cohabitation agreement or marriage contract can be extremely important. It allows the people to set out how they wish to deal with one another both during and after their relationship.

For example, a woman who marries for a second time could write a marriage contract specifying that the home she is bringing into the marriage – perhaps her property settlement from her first marriage – is not to be shared with her second husband, should the new marriage come to an end. Without this provision in a marriage contract, her second husband would have an automatic statutory right to share equally in the value of the home (assuming they lived in it together) under the Family Law Act.

Or, by way of another example, a woman entering into a common-law relationship whose partner has verbally promised to share all of his property with her if the relationship ends, could ensure this will happen by having a cohabitation agreement prepared that says just that.

Any reluctance on the part of the partner to put into writing a verbal commitment should serve as a red flag that there may be further trouble down the road.

A cohabitation agreement is an agreement between people who either live together or are about to do so. These agreements most often deal with financial and property issues. They cannot deal with custody and access arrangements for children – these issues can only be determined if the people have children at the time they separate.  If the people later marry, the cohabitation agreement can become the marriage contract.

A marriage contract is very similar to a cohabitation agreement, except that it is for people who are married or who are planning to marry.

A separation agreement, whether between people who are married or living in a common-law relationship, deals with the many issues that arise at the end of the relationship, including custody and access, child and spousal support and division of property.

A separation agreement cannot deal with divorce or a restraining order, as these must come from a court.

Before signing a domestic contract, it is crucial that each person seek independent legal advice to ensure they understand the terms of the agreement, and in particular, how what they are agreeing to may be different from their rights under the law.

People also have the right to full and honest information about the other person’s financial situation, including income, property and debts.

A domestic contract will not be binding if it can be proven that it was signed under duress or is grossly unfair, or if either person failed to provide full financial disclosure to the other. However, courts grant a high level of autonomy to competent adults to make their own arrangements, however unfair they may appear, so it can be difficult to establish any of these grounds for overturning a domestic contract. This is why legal advice before signing the agreement is so important.

Determining whether or not there was duress is very much fact-dependent and case-specific. In the case of a marriage contract, courts consider such factors as:

  • Did one person convince the other not to seek independent legal advice?
  • Does one have obviously more power than the other (eg. significant imbalance in literacy, education level, language skills, wealth)?
  • Was the contract presented to one person very close to the date of the wedding, leaving no time to obtain legal advice or even to give the contract proper review

With respect to a separation agreement, the court could consider such factors as:

  • The presence of abuse (past or present)
  • The circumstances of the separation (was it triggered by abuse?)
  • Any “bargaining” or threats on the part of one party towards the other (for example, is the abuser promising not to fight for custody if the woman signs away her property rights?)
  • An imbalance of power due to financial resources, access to legal representation, language, literacy, education level, immigration status in Canada, etc.

Women leaving abusive relationships are especially vulnerable to being coerced into signing separation agreements that do not protect their legal rights. Independent legal advice is particularly important in these situations.

When a lawyer provides independent legal advice (often called ILA), s/he signs a document indicating that this advice has been given and that s/he is satisfied the person understands the implications of what they are signing and has not been coerced into doing so.

When someone declines to obtain ILA but meets with a lawyer to sign a domestic contract, the lawyer signs a similar document stating that the person has been offered the opportunity to obtain ILA but has declined.

In either instance, the document signed by the lawyer is attached to the domestic contract and can be important evidence later if there is a dispute about the agreement.