B. Domestic Contracts under the Ontario Family Law Act

Author:Julien D. Payne - Marilyn A. Payne
Pages:68-89
 
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1) General Observations

Ontario was the first province to introduce comprehensive statutory provisions regulating domestic contracts. This was achieved by the Family Law Reform Act, 1978,32which was superseded in 1986 by the Family Law Act,33Part IV of which is specifically entitled "Domestic Contracts."

Part IV of the Family Law Act endorses contractual autonomy by enabling persons to contract out of rights and obligations that would otherwise arise pursuant to the Family Law Act. Subsection 2(10) of the Family Law Act specifically provides that "[a] domestic contract dealing with a matter that is also dealt with in this Act prevails unless this Act provides otherwise." A significant

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qualification to the paramountcy of a domestic contract is found in subsection 33(4) of the Family Law Act. This subsection empowers a court to set aside a provision for support or a waiver of the right to support in a domestic contract if the terms of the agreement (1) result in unconscionable circumstances, (2) shift the prospective burden of supporting family dependants to the public purse, or (3) the domestic contract is in default at the time of an application for support under Part III of the Family Law Act.34Somewhat limited powers are also conferred on the court to vary all or part of a domestic contract under section 56 of the Family Law Act, although it is always open to the court to set aside any provision of a domestic contract that undermines the best interests of a child.35Section 51 of the Family Law Act defines a domestic contract to mean "a marriage contract, separation agreement, cohabitation agreement, paternity agreement or family arbitration agreement." This definition applies for all purposes of the Family Law Act pursuant to the supplementary definition of "domestic contract" in subsection 1(1) of the Act.

Except insofar as the Family Law Act expressly provides to the contrary, the general principles of the law of contract apply to "domestic contracts" within the meaning of the Family Law Act, 1986. Non-compliance with the explicit requirements of the Family Law Act does not necessarily preclude an action on the agreement at common law.

2) Marriage Contracts36

Section 51 of the Family Law Act empowers persons to enter into marriage contracts before or during their marriage, provided that in the latter circumstance they are still cohabiting at the time of the execution of the agreement.37Marriage contracts cannot be entered into by unmarried cohabitants, whether of the same sex or of the opposite sex.38In light of subsections 1(1) and (2) of the Family Law Act, marriage contracts may be entered into by same-sex married couples, parties to a void or voidable marriage celebrated in good faith, or by parties to a valid foreign polygamous marriage.

Pursuant to subsection 52(1) of the Family Law Act, the parties to a marriage contract may regulate their respective legal rights and obligations

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during the marriage, on separation, on annulment or dissolution of the marriage, or on death. A valid marriage contract that regulates "the ownership" and "division of property" takes precedence over the statutory equalization entitlements conferred by Part I of the Family Law Act.39Specific property may also be excluded from the equalization process pursuant to paragraph 4(2)6 of the Act.40A marriage contract may also preclude an order for support being granted under Part III of the Act, subject to the court’s discretionary jurisdiction to override the contract under the conditions specified in subsection 33(4) of the Family Law Act or under section 56 of the Act.

If spouses wish to predetermine their property rights on marriage breakdown or death, declarations of ownership may be insufficient to exclude an equalization claim under section 5 of the Family Law Act because such claims are not dependent on ownership.41A marriage contract, unlike a separation agreement, cannot limit the rights conferred on a spouse by Part II of the Family Law Act.42Pursuant to section 19 of the Act, both spouses have an equal right to possession of the matrimonial home in the absence of a separation agreement or court order to the contrary. Furthermore, neither spouse can unilaterally dispose of or encumber an interest in the matrimonial home in the absence of authority conferred by a separation agreement or court order. However, subsection 52(2) of the Family Law Act does not preclude a marriage contract from determining rights of ownership in the home or excluding the home or its value from any spousal equalization claim based on section 5 of the Act. Paragraph 52(1)(c) of the Family Law Act precludes the parties to a marriage contract from determining prospective rights to the custody of or access to their children. A marriage contract may, nevertheless, define the right to direct the education and moral upbringing of the children. Any such provision is subject to the court’s discretionary jurisdiction under section 56 of the Family Law Act to disregard the provision where the best interests of the child are not thereby served.

3) Cohabitation Agreements

Section 53 of the Family Law Act provides that cohabitation agreements may be entered into by persons of the opposite sex or of the same sex who are cohabiting or intend to cohabit but who are not married and have no present intention to marry. The fact that two people are sharing accommodation

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does not necessarily constitute cohabitation. Subsection 1(1) of the Family Law Act defines "cohabit" as meaning "to live together in a conjugal relationship, whether within or outside marriage." Same-sex cohabitants fall within the scope of section 53 of the Family Law Act pursuant to statutory amendments43that were implemented in Ontario in consequence of the judgment of the Supreme Court of Canada in M v H.44Cohabitation agreements, as defined by section 51 of the Family Law Act, may regulate the rights and obligations of the respective parties during cohabitation, on the cessation of cohabitation, or on death. Such agreements, like marriage contracts, may predetermine the ownership or division of property, support rights and obligations, the right to direct the education or moral upbringing of children, and any other matter in the settlement of the cohabitants’ affairs.45If the parties to a cohabitation agreement subsequently marry each other, the agreement is deemed to be a marriage contract pursuant to subsection 53(2) of the Act.

4) Separation Agreements

Section 54 of the Family Law Act provides that a separation agreement may be entered into by persons of the opposite sex or of the same sex who have cohabited and are living separate and apart. The term "cohabit" is defined in subsection 1(1) of the Family Law Act as meaning "to live together in a conjugal relationship, whether within or outside marriage." The words "living separate and apart" in section 54 of the Act bear the same meaning as paragraph 4(1)(e) of the Divorce Act.46Accordingly, the fact of separation and an intention to separate must co-exist before spouses or other persons can be found to be living separate and apart.47Continued residence under the same roof does not preclude a finding that the parties are living separate and apart, provided that they are living independent lives while sharing common accommodation.48Furthermore, isolated or casual acts of post-separation

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sexual intercourse do not preclude a finding that the parties are living separate and apart.49At common law, married couples could enter into valid separation agreements before withdrawing from cohabitation, provided that a cessation of cohabitation was imminent. The language of sections 52 and 54 of the Family Law Act imply that pre-separation agreements are now characterized as marriage contracts. The difference between marriage contracts and separation agreements is not merely a matter of form. Paragraph 52(1)(c) and subsection 52(2) of the Family Law Act preclude a marriage contract from regulating custody and access rights and render unenforceable any provision thereof relating to the limitation of possessory or disposition rights in the matrimonial home arising under Part II of the Family Law Act. No corresponding qualifications apply to separation agreements.50Where separation is imminent, therefore, the execution, as distinct from the drafting of an agreement, should be deferred until the parties have ceased cohabitation. Otherwise, there may be serious impediments to a complete and final settlement of all outstanding issues.

Where a valid and enforceable separation agreement has been executed, its terms prevail over family property and matrimonial home rights that might otherwise have arisen under Parts I and II of the Family Law Act.51

Spousal support claims under Part III of the Family Law Act may also be barred by the provisions of a separation agreement, subject to the possible application of subsection 33(4) of the Family Law Act.52Although a separation...

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