Prenuptial Agreement Law

The Law in Ontario

Prenuptial agreements in Ontario are known as marriage contracts. They have been given formal recognition in statute since at least 1978. Section 52(1) of the Family Law Act, R.S.O. 1990, c. F.3, as amended, provides:

“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,

(a) ownership in or division of property;

(b) support obligations;

(c) the right to direct the education and moral training of their children, but not the right to custody of or access to their children; and

(d) any other matter in the settlement of their affairs.”

More generally, a marriage contract is a type of domestic contract. Domestic contracts also include cohabitation agreements, separation agreements, paternity agreements, and family arbitration agreements (section 51 of the Family Law Act).

Form of Contract

A marriage contract must be in writing, signed by the parties, and witnessed (section 55(1) of the Family Law Act).

So long as a marriage contract meets these formal requirements, it will be followed by a court, except as set out below.

What Cannot Be in a Marriage Contract

A marriage contract is not permitted to deal with most parenting issues, particularly custody of, and access to, children (section 56(1) of the Family Law Act). This is because in the legal test for these issues is the best interests of the children, and the court always retains jurisdiction to decide what is in the best interest of the children, regardless of what parents may agree between themselves.

A marriage contract is not permitted to deal with child support (section 56(1.1) of the Family Law Act). This is because child support is considered the right of the child, and parents are not permitted to reduce it on the child’s behalf.

A marriage contract is not permitted to deal with fidelity (section 56(2) of the Family Law Act). This is because family law issues in Canada are decided without regard to fault.

As a practical matter, most marriage contracts deal with the division of property upon a couple separating or one of the parties passing away, and the payment of spousal support (alimony) after the couple separates or one of the parties passing away.

Grounds for Challenging a Marriage Contract

Section 56(4) of the Family Law Act sets out the three grounds for challenging a marriage contract. The first of these is “if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made.” The idea is that a marriage contract is a financial agreement, and to make an intelligent decision as to whether to enter into such a contract, both parties should be fully aware of each other’s financial situation.

The second ground is “if a party did not understand the nature or consequences of the domestic contract.” For this reason, it is recommended as best practice that both parties retain lawyers to advise them about the marriage contract before entering into it. However, this is not a legal requirement and the courts have on many occasions upheld agreements where a party did not obtain legal advice. Generally, if a party was recommended to retain a lawyer, and given the opportunity to retain a lawyer, a court would consider that sufficient.

The third ground is “otherwise in accordance with the law of contract.” This includes any reason that any commercial contract would be set aside, for instance, fraud by one of the parties. The main issue on this ground for marriage contracts is coercion or duress. An example would be something like one of the parties raises the issue of entering into a marriage contract for the first time on the eve of the wedding after wedding invitations have gone out, and threatens to cancel the wedding if a marriage contract is not signed.

Validity of Marriage Contracts

In general, so long as both parties were represented by lawyers in entering into the agreement a court will uphold a marriage contract. Even if both parties do not have a lawyer, so long as both parties understood the basics of the agreement, a court generally will uphold the marriage contract.

A court may decide to modify a term of a marriage contract if it is “unconscionable” – i.e. shocks the conscience of the court. An example of this might be an agreement that leaves one party in such a poor financial situation that the party must rely on social assistance to survive. However, a court will not intervene with a marriage contract simply because it is unfair.

Timing of Entering into a Marriage Contract

A marriage contract may be entered into either before or after marriage. From a legal point of view the timing does not matter.

To avoid an appearance of coercion or duress, often if a marriage contract cannot be completed at least one clear month prior to the wedding, couples on the advice of their lawyers will wait until after their wedding to sign the agreement. It is not uncommon that more complex marriage contracts end up getting signed after the wedding, simply because couples underestimate the timelines involved and the desire to avoid any appearance of coercion or duress by signing just before the wedding.

Inheritances and Gifts from Third Parties Invested in a Matrimonial Home

Whether an inheritance or gift from a third party invested in a matrimonial home is protected in a marriage contract is going to depend on the particular wording of the marriage contract.

That being said, it is normally done. There is a quirk in Ontario family law that the value of the matrimonial home is shared equally by the couple regardless of the length of the marriage or the source of the funds used to purchase the home, unlike all other property.  As a result, it is almost standard that a marriage contract provides that any inheritances or gifts from third parties that are invested in a matrimonial home are exempt from division between the couple.

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