Domestic Contracts

Domestic contracts are agreements between two spouses, or cohabiting partners, that define the boundaries of a marriage, living arrangement or separation. There are three main forms of domestic contracts:

Marriage contracts,
Cohabitation agreements, and
Separation agreements.

Marriage Contracts

Marriage contracts, also referred to as pre-nuptial agreements, include the terms of a divorce or separation, should the marriage breakdown. Such agreements are typically signed prior to entering into a marital relationship, although they are sometimes signed during the marriage relationship. These contracts define the terms of:

Ownership and division of property
Spousal support
Right to choose the education and moral training of any marital children

Marriage contracts cannot define the terms of child custody, child visitation, or child support. However, because educational, religious, or moral training are decisions that can be made prior to a child's birth, such decisions may be agreed to by the contract.

When to Enter Into a Marriage Contract

Parties often enter into a marriage contract when they want to protect any assets they own prior to marriage, or when one party earns a significantly higher income and wishes to keep this money upon divorce. A marriage contract is often necessary in the following situations:

One of the spouses already has an estate plan that he or she does not wish to disturb
The marriage is a second marriage for one or both of the spouses
One of the spouses owns significant assets or a business prior to marriage
One of the spouses already owns the property that will become the matrimonial home during the marriage
One of the spouses is the sole provider for an elderly parent or other dependent relative
One of the spouses earns a significantly lower income than the other spouse due to the relationship

Marriage contracts can protect the assets of a wealthy spouse, the financial security of a spouse who earns less money, or if a spouse has foregone a career due to the relationship. Additionally, in situations where the marriage is a second marriage and one spouse must pay spousal or child support to another, or where one of the spouses provides financial support to an elderly relative, a marriage contract can serve to protect the interests of these dependent third parties.

Validity of Marriage Contracts

For a marriage contract to be valid and to be upheld by a court upon divorce or separation, the following requirements must be met:

The agreement must be written, signed, and witnessed
Each party must fully disclose all assets, debts, and liabilities
Each spouse must obtain independent legal counsel, even if there appears to be no disputed issues
The parties must make their intent clear on the face of the agreement
There must be no fraud, undue influence, duress, or unconscionability

If any of these requirements are not met, the marriage contract can be challenged and may not be upheld upon divorce.

Marriage Contracts from Other Jurisdictions

The province of Ontario recognizes marriage contracts from other jurisdictions if such contracts meet the above requirements and complies with Ontario law.

Cohabitation Agreements

Because the laws governing married couples do not apply to unmarried cohabiting couples, it is often wise to enter into a cohabitation agreement if you plan to enter into a long-term cohabiting relationship with another without getting married. A cohabitation agreement is a written contract where the parties agree to the division of property, support, or other matters if the parties later terminate the relationship. If a cohabiting couple later severs their relationship, the rules governing property division will not automatically protect the rights of the parties. Therefore, entering into a cohabitation agreement allows a couple to determine their rights upon separation prior to cohabitation.

Cohabitation

Cohabitation is defined by the Family Law Act as the state of living together in a conjugal relationship, whether within or outside of marriage. When looking at whether two parties continuously cohabit, courts will consider the following factors:

Common shelter
Sexual behavior of the parties
How the parties behaved socially
Services the parties performed for each other
Economic relationship between the two parties

Under the Family Law Act, only parties that are found to be cohabiting are permitted to enter into cohabitation agreements.

Validity of Cohabitation Agreements

The requirements for a cohabitation agreement are similar to those for a marriage contract. For a cohabitation agreement to be considered valid, the following requirements must be met:

The agreement must be written, signed, and witnessed
Each party must fully disclose all assets, debts, and liabilities
Each spouse must obtain independent legal counsel
The parties must make their intent clear on the face of the agreement
There must be no fraud, undue influence, duress, or unconscionability

If a couple enters into a cohabitation agreement and they later decide to marry, the cohabitation agreement will automatically become a marriage contract.

Separation Agreements

Separation agreements are a third form of domestic contract that are entered into at the termination of marriage, rather than prior to entering into a marital or cohabitation relationship. Separation agreements provide for the division or property and set out the financial and support responsibilities of each spouse following divorce.

Family Law Information