In Ontario, the Family Law Act allows parties to enter into domestic contracts, which include cohabitation agreements (for parties who are living together or plan to live together and are not married) and marriage contracts (for parties who are or intend to be married).
The law permits spouses to enter into domestic contracts that provide for different income and asset sharing regimes than those provided for under the relevant family law statutes.
For married spouses, s. 52 of the Family Law Act provides as follows:
52. (1) Two persons 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:
For unmarried spouses, s. 53 of the Family Law Act applies and it provides as follows:
53. (1) Two persons who are cohabiting or intend to cohabit and who are not married to each other may enter into an agreement in which they agree on their respective rights and obligations during cohabitation, or on ceasing to cohabit or on death, including,
(2) If the parties to a cohabitation agreement marry each other, the agreement shall be deemed to be a marriage contract.
(R.S.O. 1990, c. F.3, s. 53 (2)).
Creating your own contract allows you to divide property and arrange your financial affairs in a manner that best suits your needs and your view of fairness. The legislation and case law can have unexpected and harsh consequences for separating spouses. The Family Law Act allows you to draw up a contract that provides for rules and terms that may be different than what the law provides for married or non-married couples. For example, although Ontario law requires married couples to equalize their net family property on separation, a marriage contract can opt out of the property sharing regime of the Family Law Act. On the other hand, while most provinces do not provide for a division of property between unmarried spouses on separation, you can devise a cohabitation agreement that would give you the same property rights as if you were married.
Cohabitation agreements and marriage contracts often include the following provisions: financial arrangements while you are together, sharing of property or business interests when your relationship ends, division of pension, allocating responsibility for debt, quantum and duration of spousal support, and possession or sale of the common residence or matrimonial home.
When compared to court where a judge will make rulings regarding your rights and obligations on the breakdown of your marriage or relationship, having your own contract gives you more control and certainty on a break-up.
There are certain basic requirements before a domestic contract will be recognized by the court: “A domestic contract and an agreement to amend or rescind a domestic contract are unenforceable unless made in writing, signed by the parties and witnessed” (Family Law Act, R.S.O. 1990, c. F.3, s. 55 (1)). Although any adult can be a witness, the lack of independent legal advice for spouses entering into a marriage contract or cohabitation agreement will likely render the contract unenforceable.
Because a domestic contract can be set aside if one party misrepresented their financial circumstances, it is important that parties to a contract provide fulsome financial disclosure before entering into an agreement. (Please see the tab regarding Separation Agreements for further information concerning the variation and/or setting aside of domestic contracts).
When circumstances change, you and your partner may decide to amend your existing cohabitation agreement or marriage contract. You will be required to prepare and execute a new written agreement and have it signed by witnesses.
Our lawyers can draft and review agreements and devise a process to help protect the enforceability of your contract and reduce the likelihood that it may be set aside in the future. We can also file your agreement with the court in order to allow the court to enforce the terms of the contract.