Toronto family lawyers have witnessed a growing number of clients entering into cohabitation agreements and marriage contracts (prenuptial agreements). Traditionally, Ontario has a strong public policy favoring individuals contracting autonomy – deciding their own interests through contractual arrangements. This interest, however, is not absolute. The agreements addressing matrimonial issues (marriage contracts, otherwise known as prenups) are subjected to higher level of judicial scrutiny – far beyond that applied to contracts in general. While a well drafted and properly executed agreement carries a significant presumption of validity, it may nevertheless be voided by a court if one party is able to prove fraud, duress, lack of financial disclosure, lack of understanding of the terms or other inequitable conduct. Compiling financial information required under the full disclosure requirement can often be a tedious and even onerous task. It is no wonder that clients often ask their family lawyers to provide only partial disclosure. Such instructions, however, could have a potentially devastating effect on the future enforceability of a domestic contract.
When entering into a domestic contract, both parties have a positive obligation to disclose all significant assets under s. 56(4)(a) of the Family Law Act (FLA). In a 2008 case, LeVan v, LeVan, the Ontario Court of Appeal awarded a $5.3-million equalization amount to a wife who waived her matrimonial property and support rights in a prenuptial agreement. The court invalidated the prenup on the basis that the husband failed to disclose his full income and net worth to the wife. The facts of LeVan also touched upon another possible basis for challenging prenups. Namely, the wife signed the marriage contract merely two days before the wedding under threats from the husband to call off the wedding if she refused to agree.
The essential rule to follow when deciding how much financial disclosure to make can be summed up as follows: to be considered full and frank, disclosure must be complete and adequate, and it must include not only assets and liabilities but also the contracting spouses’ respective incomes. One party’s failure to make full disclosure could easily be interpreted by a judge as a deliberate attempt to mislead the other spouse.
A New York state Petrakis decision is informative. Here, the judge tossed out a prenuptial agreement where a real estate mogul pressured his fiancée, to either sign a one-sided prenuptial agreement days before their wedding or he would cancel the wedding. He also told his fiancée that he would tear up the agreement as soon as they had children, which he then failed to do.
As the cases across common law jurisdictions evidence, if you are entering into a marriage contract, be aware of complex nature of these agreement and err on the side of caution. If you are planning on signing a prenuptial agreement, it is wise to have one qualified family lawyer draft it and another to review it before signing and provide you with the best possible legal advice. Your marriage contract lawyer in Toronto or elsewhere in Canada should draft an agreement that will stand up to judicial scrutiny and thereby protect your assets. To do his or her job, your family lawyer will need your full cooperation.