Domestic contracts are legally enforceable agreements concerning spousal relationships. The Family Law Act sets out rules for domestic contracts including subject matter and enforceability. There are three basic types of contracts that fall into the domestic contract category.
- Marriage contracts: An agreement between a married couple or a soon to be married couple (pre-nuptial agreement or pre-marital agreement). These contracts can deal with a variety of financial and property related issues but they cannot address child custody or access upon separation.
- Cohabitation agreements: An agreement between partners who intend to or are currently living together. This type of relationship is often referred to as a common-law relationship. These contracts can cover the same issues that marriage contracts can address.
- Separation agreement: This agreement is different from the first two because it is entered into when the marriage or cohabitation has already broken down. These agreements can address financial, property and support issues. They can also address custody and access for children, which the first two agreements cannot do.
For over ten years, the courts have been endorsing the merits of domestic contracts as a means for couples to make their own deal. Domestic contracts allow couples to control the settlement process rather than have a court impose a settlement upon them. The contract can address one or more issues and it is not uncommon for single issue contracts to be used. Generally speaking, the court will enforce the terms of a domestic contract unless there are grounds not to. These grounds are rare but there are specific public policy reasons that may apply. A properly drafted domestic agreement will avoid these pitfalls.
When considering a domestic contract, you should be aware of the continuum of enforceability. I deal with this topic in more detail in another blog post , but for the purposes of this post I will summarize it. The continuum of enforceability is a practical consideration in domestic contracts. It involves the increase in enforceability weighed against the increase in complexity and compliance of the contract in relation to legal requirements. A simplified example is the effectiveness of a perfectly drafted contract that considers the tiniest of details but is not signed versus a poorly drafted contract that is signed. The broad spectrum of enforceability must be weighed against the individual needs of the couple to determine what a properly drafted domestic contract is for that specific person. This concept requires a number of considerations. Legal advice from trained lawyers is required.
Importantly for marriage contracts, these agreements can perform dual functions. They are road maps for how the spouses intend to manage their married life and how they intend to separate, if they ever have to. The act allows couples to waive certain rights that they would normally be entitled to. This is especially important in terms of financial and property rights that spouses typically gain. A clearly worded marriage contract can allow one spouse to waive their rights to the other’s spouse’s property. There is, however, an exception as it relates to the matrimonial home. The Family Law Act says that any marriage contract provision that limits a spouse’s rights under part II of the act to the matrimonial home is unenforceable. The major right involved is the right to occupy the house.
Once a contract is created, a party can attack a domestic contract on four grounds.
- Validity: Allege that the domestic contract was not made correctly
- Enforcement: a specific provision violates the Family Law Act or some other statute
- Overriding Domestic Contract: The court has residual power to override agreements for certain reasons, generally public policy grounds.
- Interpretation of agreements: The interpretation of the agreement can be attacked if there is ambiguity or unclear terms.
Generally speaking though, domestic contracts will be respected by the court. Where they are challenged, the court can choose to remove one or more provisions from the contract or declare the entire agreement invalid. Contract law principles will form the basis for how the court evaluates a domestic contract. A critical factor in a domestic contract being upheld by the court is the simple concept of fairness. It does not need to be a reflection of a humanitarian award, but the contract cannot be shockingly unfair.
If you are interested in a domestic contract you should be aware that they are not simple or cheap to prepare. The starting cost for an agreement is $3,000. This expense provides an effective means for couples to set out their legal obligations. The lawyers at Dale Streiman Law LLP have been drafting domestic agreements for over 30 years. They will ensure that the contract meets all the legal requirements to be a valid and enforceable expression of your legal objectives while at the same time keeping costs down.
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[1] Link to “Domestic Contracts and the Continuum of Enforceability”
