Person Signing Contract - Close-Up

Challenging a domestic contract is not an easy task to undertake. Domestic contracts include Cohabitation Agreements, Marriage Agreements, and Separation Agreements. Generally speaking, the Courts give high level of deference to properly drafted and executed Domestic Contracts, but under some circumstances parts of such contracts or the entire contract may be set aside by a Court.

According to section 56(4) of the Family Law Act:

A court may, on application, set aside a domestic contract or a provision in it,

(a)  if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;

(b)  if a party did not understand the nature or consequences of the domestic contract; or

(c)  otherwise in accordance with the law of contract.
The court applies a two-step test for setting aside contracts which involves:

  1. a) Can the party seeking to set aside the agreement demonstrate that one or more of the s. 56(4) circumstances is engaged?
  2. b) If so, is it appropriate for the Court to exercise its discretion to set aside the agreement?

Whether a Court will actually intervene depends on the circumstances of each case. The factors taken into consideration by the courts when exercising its discretion as to whether to set aside a domestic contract are listed in several cases. Factors considered when considering whether a domestic contract should be set aside include:

  1. Whether there had been concealment of assets or material misrepresentation;
  2. Whether there had been duress, or unconscionable circumstances;
  3. Whether the petitioning party neglected to pursue full legal disclosures;
  4. Whether the petitioning party moved imperiously to have the agreement set aside;
  5. Whether the petitioning party received substantial benefits under the agreement;
  6. Whether the other party had fulfilled his or her obligations under the agreement; and
  7. Whether the non-disclosure was a material inducement to entering the agreement, in other words, how important was the non-disclosed information to the negotiations.

Call us today to speak with one of our Separation Lawyers Toronto to learn more about your rights under a domestic contract.

By Solmaz Separy, Managing Lawyer