Domestic Contracts – The Importance of Accurate Financial Disclosure and Legal Advice Posted onMay 18, 2021June 10, 2023 Jason Lane In Ontario, common-law couples and married partners are able to enter into Cohabitation Agreements and Marriage Contracts (“pre-nuptial agreements”). In the unfortunate event of a breakdown of the relationship, partners are then able to enter into a Separation Agreement (collectively, all of these agreements are known as “domestic contracts”). One function of these types of agreements/contracts is to allow the parties to vary the Family Law Act rules and provisions as they relate to spousal support and the division of property in the event of a separation or divorce. Whether you are entering into a Marriage Contract, Cohabitation Agreement, or Separation Agreement, it is very important that both spouses provide complete and accurate financial disclosure in order for the agreement to be valid and enforceable, as section 54(4) of the Family Law Act states the following: (4) A court may, on application, set aside a domestic contract or a provision in it, (a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made; (b) if a party did not understand the nature or consequences of the domestic contract; or (c) otherwise in accordance with the law of contract. Marriage Contracts and Cohabitation Agreements As mentioned, a Marriage Contract or Cohabitation Agreement is an agreement between the parties that will determine their respective property rights in the unfortunate case of a divorce or separation. Both parties need to fully understand and be aware of the property rights that they are waiving and/or obtaining by signing the agreement. The parties cannot fully understand and be aware of the implications of the agreement without complete and accurate financial disclosure from both sides. Separation Agreements All of the above is equally true for Separation Agreements. This is quite clear when spousal or child support issues are being negotiated between the parties, as these support payments depend on the income of the spouses. When the parties agree on everything and do not wish to claim support from each other, they may be tempted to skip this step in order to get the separation over with, as providing all of the documentation for full disclosure can be a tedious and time-consuming process. However, it is still very important to provide full financial disclosure to ensure that the whole or parts of the contract are not deemed unenforceable, should the contract ever be reviewed by a court. Independent Legal Advice It is also strongly advised that both parties obtain independent legal advice (“ILA”) before entering into a Marriage Contract, Cohabitation Agreement or Separation Agreement. While ILA is not a requirement prescribed by law, it is a recognized way of demonstrating that each party entering into the agreement fully understood the domestic contract’s “nature or consequences” and therefore prevents parts or the whole of the domestic contract from being set aside pursuant to section 54(4)(b), noted above. When providing ILA, a lawyer will not only review the agreement but will also review the financial disclosure of the parties to the agreement. Proper ILA can only be provided when complete and accurate disclosure has been given. If financial disclosure is incomplete or inaccurate, the lawyer providing ILA cannot appropriately consider all pertinent factors. For example, the advice as to whether or not one should sign the agreement may be different if additional debts or additional assets were disclosed. If you require advice regarding your domestic contract, please feel free to contact Jason Lane at (289) 220-3241 or jason@durhamlawyer.ca “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” Authors Jason Lane 289-220-3241 (905) 668-9737 jason@durhamlawyer.ca