In the spirit of encouraging parties to settle their own affairs, courts are generally loathe to overturn domestic contracts. That being said, if a domestic contract is manifestly unfair to the point of unconscionability, the court reserves the right to set aside an agreement that has been executed and purports to settle all the issues between spouses.
Why would a domestic contract be deemed unconscionable?
Contrary to popular belief, independent legal advice is not a condition precedent to the legal enforceability of a domestic contract. Ofcourse, obtaining independent legal advice is the best way to ensure that the domestic agreement will be upheld and fairly reflects the interests of both parties so as to protect it from being challenged later on.
The only requirements for a valid domestic contract are that it must be in writing, signed, and witnessed. Section 56 of the Family Law Act sets out the most common reasons as to why a domestic contract may be set aside, in whole or in part. They include the following:
- A party to the contract failed to disclose a significant asset or debt in existence when the contract was executed.
- A party failed to understand the nature and consequences of the agreement (therefore raising issues of capacity).
- Any other ground upon which an agreement may be attacked pursuant to the ordinary principles of contract law.
A lawyer who is retained to provide ILA should be careful that his or her client has received full financial disclosure and that the contract is consistent with the client’s objectives. There should be no doubt in the lawyer’s mind that the client is signing the contract freely and voluntarily. Merely providing this advice and having the client provide verbal assurances that no undue influence is at play may not be sufficient.
In the 2000 case of Bradley v. Bradley, the Supreme Court of Ontario affirmed rationale previously set out in in Youngblut v. Youngblut (1979), 11 R.F.L. (2d) 249 (Ont. H.C..
In Youngblut, the plaintiff had received independent legal advice when signing a separation agreement. Nevertheless, Justice Carter found that due to duress, she was not bound by the agreement:
In the case before me while it is true that the plaintiff obtained independent legal advise [sic], and while she may well have been told that on the law then existing she had a right to institute a partition action in which she might well be successful, that is small comfort to a person who wished to have food on the table and a roof over her head at the instant moment and not six months or more from then. I am of the opinion that the pressure upon her, bearing in mind the respondent’s past conduct towards her and his harassing telephone calls, would constitute undue influence and cause her to ignore her solicitor’s advice and execute the deed in return for the money owing to her.Therefore, Youngblut v. Youngblut demonstrates that simply going through the motions and obtaining legal advice as proof that all four corners of a domestic contract are being observed is simply not enough. The lawyer must be fully apprised of the client’s situation, and that includes not only the history of the relationship and its breakdown, but the current state of the client’s relationship or marriage, the client’s health and emotional states as well as the client’s objectives in entering into the domestic contract.
The lawyer should fully canvass the full nature of the agreement with the client, along with its attendant risks, effects, and consequences. Only by going through this comprehensive process can the client and the lawyer protect themselves from surprises later on.