In order to properly advise clients with respect to cohabitation agreements and marriage contracts, it is extremely important to not only understand the legislation that gives us the authority to do so, but also the law that gives the court the authority to set the contract aside.
Section 52 of the Family Law Act provides that 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,
- ownership in or division of property;
- support obligations;
- the right to direct the education and moral training of their children, but not the right to decision-making responsibility or parenting time with respect to their children; and
- any other matter in the settlement of their affairs.
Section 53(1) of the Family Law Act provides that two persons who are cohabiting or intend to cohabit and who are not married to each other have this same ability, and section 53(2) adds that if the parties to a cohabitation agreement marry each other, the agreement shall be deemed to be a marriage contract.
Section 56(4) of the Family Law Act allows a court, on application, to set aside a domestic contract or a provision in it,
- if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
- if a party did not understand the nature or consequences of the domestic contract; or
- otherwise in accordance with the law of contract.
The phrase “otherwise in accordance with law of contract” refers to the fact that at common law, a domestic contract, like any other contract, may be set aside on the basis of unconscionability, undue influence, mistake, repudiation, duress or misrepresentation.
Setting aside a marriage contract under s. 56(4) is a two stage process. Under the first stage, the court must consider whether the party seeking to set aside the agreement can demonstrate that one or more of the circumstances set out in s. 56(4) have been engaged. If the court finds that this is the case, it moves on to the second stage and considers whether it is appropriate to exercise its discretion in favour of setting aside the agreement. The burden of proof is on the party seeking to set aside the domestic contract.
Every year, a significant number of parties to cohabitation agreements and marriage contracts seek to rely on section 56(4) to have their agreements set aside. Below are brief summaries of some of the most recent cases along with what you, as authors and advisors on these types of contracts, should take away from them.