Wednesday, January 04, 2006

Are Home-Made Separation Agreements Binding?

HOW TO DO YOUR OWN BRAIN SURGERY - OTHERWISE ENTITLED “ARE HOME MADE SEPARATION AGREEMENTS BINDING?”

The short answer is “yes”, agreements drafted by the parties to a separation themselves can be binding. Section 55(1) of the Ontario Family Law Act sets out the minimum formal requirements for domestic agreements:

“a domestic contract and an agreement to amend or rescind a domestic contract are unenforceable unless made in writing, signed by the parties and witnessed.”

The term “domestic agreement” is a comprehensive term, which includes separation agreements, cohabitation agreements, and marriage agreements. Married people, or cohabitees, are free to draft their own cohabitation or marriage agreements, setting out certain terms of their relationship. The agreements can cover spousal support, child support, property issues and “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 “any other matter in the settlement of their affairs.” [emphasis supplied]. A separation (as opposed to a cohabitation or marriage agreement) agreement can, and almost always does, deal with custody of or access to children.

There are four other things that are unenforceable if included in a domestic agreement:

• married partners are not permitted to sign away their right to possession of the matrimonial home (s. 52(2)) in a cohabitation or marriage agreement, although they can do it in a separation agreement;

• a cohabitation or marriage agreement regarding the “education, moral training, custody of or access to” the children of the relationship may be disregarded if the agreement is not in the children’s best interests;

• an agreement which falls short of the provisions of the Child Support Guidelines regarding the provision of child support may be set aside if it is unreasonable, having regard to the CSG, as well as to any other provision relating to support of the children in the agreement;

• a provision requiring a partner to remain chaste is unenforceable, but provisions restricting support in the event of cohabitation with, or marriage to, a new partner, are still enforceable.

A domestic agreement, whether drafted by the parties themselves, or by a lawyer, can be set aside under certain circumstances (s. 56(4)):

• if a party failed to disclose significant assets or debts;

• if a party did not understand the nature of consequences of the domestic contract; or

• otherwise in accordance with the law of contract.

Naturally, it is the “otherwise in accordance with the law of contract” part of s. 56(4) which attracts the most litigation. Most folks know what their partners have in the way of assets and liabilities, and most people understand the terms of the agreement. A party wanting to set aside an agreement may try, therefore, to have the agreement aside for fraud, mistake, undue influence or unconscionability, which are the main deal-breakers in contract law.

The setting aside of agreements will be the subject of an upcoming post. Let’s just say for now that people who draft their own agreements run the following risks:

• the agreement may be unenforceable because it doesn’t meet the formal requirements (has not been signed and witnessed);

• the agreement may be set aside pursuant to the provisions of s. 56(4); or

• the agreement may be a very bad deal, but may be enforceable anyway, because it is not subject to being set aside pursuant to the provisions of s. 56(4) of the Family Law Act.

In short, separation agreements are complex legal documents. People do create them on their own, and sometimes fairly and successfully. However, as you can see, the pitfalls are huge, and can be costly. If you draft your own agreement and it isn’t enforceable (or it is enforceable, but you want out of it), you may be stuck with the consequences. If you retain a lawyer to draft the agreement, the lawyer’s job is to avoid the pitfalls for you. If s/he fails in that regard, you have recourse to the lawyer’s errors and omissions insurance plan to cover any negligent drafting.

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