The adversarial system of solving disputes (Court litigation) has enormous impact on private relationships, and the consequences are most times irredeemable. Also, litigation can be very costly, no matter how simple. According to a recent survey, it can cost upwards of $10,000 - $25,000 to take a ‘simple’ lawsuit through the traditional litigation process to trial.
Generally, a well drafted contract would probably prevent disputes, and in situations where disputes arise as to interpretation of the terms of the contract,the issues for determination are easily more distilled before a judge or jury. You do not want to imagine the opposite situation, where there was no contract at all. Domestic contracts are viable means of protecting assets and preventing litigation costs/time and permanent breakdown of relationships.
What are Domestic Contracts?
Like every contract, they are agreements between partners — married or common law — setting out their legal obligations to each other in the event of separation. Clauses are expertly crafted to spell out in clear terms, obligations and rights regarding division of properties (personal or business assets), spousal support,child custody and child support.
Before people enter private relationships, they sometimes acquire some assets or liabilities. Domestic contracts are effective means of defining the impact of the new relationship on the existing assets or liabilities.
In Newfoundland and Labrador, there are three common types of Domestic Contracts. They are:
- Marriage Contract: A marriage contract, common referred to as a pre-nuptial agreement or a “pre-nup” is a contract entered into by a couple who are married (post-nuptial) or who intend to marry at the time of making the contract. In this agreement, parties can determine their respective rights and obligations during the marriage and upon separation. This agreement would most times determine who will own property, and to what extent they will own that property. Largely, marriage contracts would not include agreements as to child support or custody. These matters, if disputed are resolved based on the best interest of the child, and thus provisions regarding custody will not be binding if included. The relevant laws are the Divorce Act.
- Cohabitation Agreement: A cohabitation agreement can be likened to a marriage contract, with the exception that this is entered into by common law partners. In essence, it is a contract entered into by partners who live together but are not “married”. The provisions in it can be the same as those of a marriage contract and in the case that they eventually marry, a cohabitation agreement can be easily deemed to be a marriage contract. Because the parties are not married, cohabitation agreements are often used to solidify the singularity in the union - i.e. a partner’s property is different from the other’s property.
- Separation Agreement: A separation agreement is a contract entered into after separation. The provisions are extensive and unlike marriage/cohabitation contracts, separation agreements can include clauses with respect to custody, child support and parenting time of children Important Factors to take note:
Legal Advice
It is not only safe for both parties to a domestic contract to get legal advice; it is a measure to safeguard the enforceability of the contract. For one, a domestic contract entered without legal assistance stands the risk of being disregarded in whole or in part should either party change their mind on the basis that the reneging spouse did not receive independent legal advice. A determination by the court that a domestic contract is inequitable could render the contract unenforceable. A proof of independent legal advice would generally strengthen the agreement. If you are interested in a domestic contract, seek professional advice from a competent lawyer or law firm.
Compliance With The Law
An enforceable domestic contract must be in substantial compliance with the law, particularly the Divorce Act and the Family Law Act of NL. Noncompliance may render it unenforceable.
Financial Disclosure: As mentioned above, domestic contracts often govern issues like property division and spousal support. This requires that each party has full knowledge of the other’s financial standing, particularly the assets. It is in the best interest of both parties to have a full financial picture when executing the agreement. A contract signed without full financial disclosure may be queried or overturned for lack of good faith.
Apart from the above, there are other factors which may vitiate a domestic contract under the Family Law Act. Past precedents include mental incompetence or such other factors by virtue of which any party does not understand the nature and consequences of the contract.[ Ibid, s66(4)(b)] All these factors must be noted with safeguards provided for them. This is why you need to seek professional help from a competent lawyer.
Conclusion
The benefits of having domestic contracts cannot be overemphasized. However, due to the ‘delicate’ nature of contracts, it is advisable to seek advice from a legal practitioner.
DISCLAIMER: The above blog post or any other blog post on this website do not constitute legal advice. It is only intended to provide general information on the subject matter and does not by itself create a client/attorney relationship between readers and the author or serve as legal advice. If you need specific legal advice, contact a lawyer.
