Setting Aside a Domestic Contract: The Best Defense is a Fair Contract

Marriage contracts, separation agreements, and cohabitation agreements are the three main elements that make up domestic contracts in Ontario. This umbrella term covers large sections of family law therefore I have dealt with it multiple times in my previous blogs. Specifically, I have explained what these contracts are[i] and their enforceability[ii]. In this blog post I want to address fairness as an overarching theme that influences how the courts tend to look at these types of contracts. Fairness is often a key feature that the court looks at when considering whether to set aside a domestic contract.

Fairness is not the same as whether a deal was good or bad. Rather, when I speak about fairness in relation to a domestic contract it is more appropriate to think about it as shockingly unfair. The courts are not in a position to gauge whether any contract is good or bad. They only step in and use one of the many equitable doctrines that have developed over the years when a contract is so shockingly unfair that it offends our concepts of justice. In family law, the courts have been willing to set aside domestic contracts when they reach this level.

Two recent cases highlight the importance of fairness in domestic contracts. In Cuffe v Desjardins[iii], the wife was trying to set aside a marriage contract that formed the basis for a separation agreement between her and her husband. Both agreements were one sided in terms of property division and support obligations. The husband was clearly getting the better deal. However, the court was clear that unfairness alone is not enough to set aside a deal. Rather it was the husband’s actions in preying upon his wife’s weakness and unduly influencing her into accepting the bad deal that allowed the court to set aside the domestic contracts. The deal was unfair and the husband was taking advantage of his position to force his wife to accept an unfair deal. The fact that the wife received independent legal advice warning her about the very unfairness that she eventually accepted was not enough to overcome the husband’s deficit conduct. Consequently, the court could and did set aside the marriage contract and the separation agreement.

In the second case, Lougheed v Ponomareva[iv], the court once again dealt with the concept of fairness as it relates to setting aside a domestic contract. In that case, the wife alleged that the agreement she entered into during mediation was unfair and should not be enforced. She alleged that at the time the deal was negotiated she was on medication that inhibited her ability to process what was going on and what she was agreeing to. The court looked at the agreement and said that it is impossible to determine that the agreement was so unfair that the husband should have questioned the mental capacity of the wife. Deals generally are trade-offs between parties and sometimes the best deals leave neither party particularly happy with the result. An unfair deal is a signal that puts the other party on notice about the mental capacity of the other. Generally speaking, individuals with diminished capacity are unable to protect themselves from bad deals and the court will step in and protect them. The husband was able to establish that the deal was fair enough and should not be reopened. The wife was unhappy with the deal but it was not shockingly unfair such that her mental capacity is called into question.

These cases illustrate how the concept of fairness fills the court’s analysis of whether or not to set aside a domestic contract. It is not the sole factor and the courts are not in a position to determine whether a domestic contract is good or bad. If the facts show that the contract is shockingly unfair, the courts will look to contract law principles like undue influence, unconscionability or mental capacity and see if the contract should be set aside. Agreements between parties generally involve a give and take between competing interests. A settlement invariably contains some provisions that favor one party and others that favor the other party. The best defense to any attempt to set a domestic contract aside is to establish on the facts that the agreement, on the whole,  is fair to both parties.

All the family law lawyers at Dale Streiman Law LLP have extensive experience with domestic contracts. We understand the importance of these documents and we can help you with any concerns you have about them. I encourage you to read my other blogs on domestic contracts and visit our website at https://www.dalestreimanlaw.com/.