Domestic Contracts

• Author: Julien D. Payne, Marilyn A. Payne
• Pages: 58-89

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 

Domestic Contracts

A. TYPES OF DOMESTIC CONTRACTS

e following ana lysis will focu s on “domestic contracts” insofar a s they have

been statutorily dened in Ontario. Even in the absence of statutory provi-

sions, however, married and unmarried cohabitants are legally entitled to

enter into binding and enforceable contract s. In some circumstances, the law

restricts the extent to which spouses or unm arried cohabitants can contrac-

tually waive rights that would otherwise vest in them pursuant to statute.

For example, the splitt ing of credits under the Canada Pension Pla n between

divorced spouses cannot be c ircumvented by a spousal contract or sepa ration

agreement, except where provi ncial legislation speci cally permits such con-

tracting out. In addition, courts a re entitled to override the terms of spou sal

contracts that pur port to waive child support ri ghts and obligations.

Domestic contracts, as dened u nder provincial and territorial statutes

in Canada, a re formal written contracts sig ned by the parties and witnessed ,

whereby married couples and unmarried cohabitants may regulate their

rights and obligations du ring their relationship or on its term ination. In On-

tario, there are ve dierent kinds of domestic contracts: () marriage con-

tracts; () cohabitation agreements; ( ) separation agreements; () paternity

agreements; and () fa mily arbitration agreements.

 See Chrispen v Topham (),  RFL (d)  (Sask QB), a ’d (),  RFL (d)  (Sask

CA). See als o Anderson v Luoma (),  RFL (d)  (BCS C).

 An Act to Amend the C anada Pension Plan and the Federal Cour t Act, RSC  (d Supp),

c , s ; see also An A ct to Amend the Canada Pension Plan (Sp ousal Agreement), SC ,

c . See Gie sbrecht v Gies brecht,  SKQB .

 Richardson v Richardson (),  RFL (d)  (SCC).

 See Family Law Act, R SO , c F., s . And see text acc ompanying note , below.

Chapter : Domestic Cont racts

e right of men and women to enter into agreements or domestic con-

tracts to regulate their aairs is expressly recognized by statute in several

provinces and territories but the legislation is not uniform throughout Can-

ada. Because space does not per mit a detailed descript ion of the dierent prov-

incial and ter ritorial statutes, the fol lowing analysis w ill exam ine the Ontario

legislation, whic h has provided the precedent for simila r legislation in several

other provinces. Before doing so, however, it is pertinent to review the judg-

ments of the Supreme Court of Canada in Hartshorne v Hartshor ne and Rick

v Brandsema. Although both of these cases focused on the British Columbia

Family Relations Act and that statute has now been superseded by theFamily

LawAct, which came into force on  March , the reasons for judgment in

both cases wi ll continue to strongly inuence courts acros s Canada, including

those in British Columbia, with respect to the eect of prenuptial and post-

nuptial agreements on matrimonial property rights. e former case dealt

with the impact of a ma rriage contract on an application for spou sal property

division. While the judgment specically addresses that particular topic, it

also provides insight into how such contracts might be interpreted and ap-

plied under statutory proper ty regimes in other provinces and terr itories. In

Hartshorne v Hartshor ne, the parties cohabited for twelve and one-half years

and were married for nine of those years. It was a second marriage for both

of them. ey had two ch ildren. After the birt h of their rst child, the w ife, a

lawyer, withdrew f rom the practice of law to assume a ful l-time homemaking

and child ca regiving role. e husband, also a l awyer, made it clear to her prior

to their marr iage that he would never again allow his property to be div ided

by reason of a marriage breakdown. e husband brought assets of . mil-

lion into the marr iage, which included his law practice, wherea s the wife had

no assets and was heavily in debt at the time of the marriage. At the hus-

band’s insistence, the spouses executed a marriage agreement declaring the

 See Matrimonial Property Act, RSA  , c M-, ss –; Family La w Act, SBC , c ,

ss –; Mar ital Property Act, SNB , c M-., s s – (marri age contracts, cohab i-

tation agree ments, separation ag reements); Family Law Act, R SNL , c F-, ss –

(marri age contracts, cohabit ation agreements, sep aration agreements); Matr imonial

Property Act, RSNS  , c , ss – (mar riage contract s, separation agre ements);

Family Law Act, SN WT , c , ss – (marr iage contracts, coh abitation agreement s,

separation ag reements); Family Law Act, R SO , c F., ss – (marri age contracts,

cohabitation ag reements, separat ion agreements); Family Law Ac t, SPEI , c , ss –

 (marri age contracts, cohab itation agreements, se paration agreeme nts); Matrimonial

Property Act, , SS , c M-., ss –  (interspousal cont racts); Family Property

and Support Ac t, RSY , c , ss  – (marri age contracts, cohabit ation agreements,

separation ag reements).

 []  SCR .

  SCC .

 SBC , c .

  

parties separ ate as to property, subject to the wife bein g entitled to a  percent

interest in the matri monial home for each year of marri age up to a maximum

of  percent. e wife received independent lega l advice that the agreement

was grossly unfa ir but signed it with a few amendments, inc luding her right to

spousal support. P ursuant to the agreement, the w ife was entitled to property

valued at , on the spousa l separation and the husband’s entitlement

was to property worth . million. In subsequent divorce proceedings, the

husband sought to rely on the agreement to avoid the operation of the statu-

tory property regime in British Columbia while the wife contended that the

agreement should be set aside on common law pr inciples or that the distribu-

tion of assets should be reapport ioned under section () of the Family Rela-

tions Act (BC) because the agreement was unfair. e trial judge concluded

that the agreement was u nfair and ordered a : reapportionment of most

of the assets, including the husband’s law practice, in favour of the husband.

Each spouse was held ent itled to a one-half interest in the matr imonial home

and contents. is judgment was upheld by a majority judgment (–) of the

British Columbia Cour t of Appeal. On further app eal to the Supreme Court of

Canada, the husband’s appeal was al lowed by a majority of –. In the major-

ity judgment, Bastarache J, with whom McLachlin CJ and Iaccobucci, Major,

Arbour, and Fish JJ concurred , formulated the following princ iples:

) e primar y policy objective underlyi ng the statutory property reg ime in

British Columbia is to ac hieve fairness.

) Marriage agreements are expressly recognized by the Family Relations

Act (BC) as providin g an appropriate means of regulating t he division of

property upon the breakdown or dissolution of marriage. As a prerequi-

site to enforceability, however, any such agreement must operate fairly

at the time of the property division. Otherwise, judicial reapportion-

ment of the property pursu ant to section () of the Family Relations Act

will be ava ilable to achieve fairness.

) To implement the legislative intention, courts must encourage pa rties to

enter into marria ge agreements that are fair and to respond to ch anging

circumstances by revisiting and rev ising their agreements from time to

time to ensure continued fairness. Parties should also be encouraged

to take personal control over their own nancial well-being upon the

dissolution of marriage and courts should be reluctant to second-guess

the arrangement upon which both spouses reasonably expected to rely.

Spouses may choose to structure their nancial aairs in a number of

ways and it is their prerogative to do so, provided that the legal bound-

aries of fair ness are observed.