Danika Beaulieu – October 2018
Whether it was in a movie, a song (cue Gold Digger from Kanye West), in the tabloids (cue recent news about Justin Bieber and Haley Baldwin), or through friends and/or family members, you have probably heard of Marriage Contracts (also known as “Pre-nuptial Agreements” or “Prenups”) at least once in your lifetime. For those of you who haven’t, a Marriage Contract is a legal document that sets out how spouses’ assets and debts are to be divided in the event of a separation or divorce. Similarly, a Cohabitation Agreement is a document that sets out how assets and debts are to be divided in the event of a common law separation. In other words, it is essentially a “Marriage Contract” or “Prenup” for unmarried parties who cohabitate in a Common Law relationship.
When done properly, Cohabitation Agreements and/or Marriage Contracts can be very useful in preventing future litigation because you and your partner are both aware of how things are to be divided if you separate. In Nova Scotia, the Matrimonial Property Act, the legislation that applies to married parties, states that either spouse is entitled to apply to have the matrimonial assets divided equally, notwithstanding the ownership of these assets. This means that any asset acquired by the parties either individually or jointly during or prior to their marriage is subject to equal division upon separation or divorce. There is no similar legislation that applies to unmarried parties, but parties can apply for an equal division under the common law. Therefore, if you would like to protect a certain asset from division, and/or would like to reduce the chances that you will require litigation if you and your partner separate, you should consider getting a Cohabitation Agreement or Marriage Contract.
Whether you are interested in obtaining a Cohabitation Agreement or a Marriage Contract, or you already have one and want to ensure it is enforceable, the Agreement or Contract should follow the following principles:
- Is it in writing?
A verbal agreement or a “gentlemen’s agreement” is not enforceable. If you and your partner agree on how everything will be divided in the event of separation, you must capture this agreement in writing. If your partner verbally agrees to a certain term, and changes his or her mind at separation, the verbal agreement may be unenforceable.
- Does it contemplate marriage to your current partner?
If you and your partner are in a Common Law relationship and have no intention of getting married in the future, a Cohabitation Agreement that does not contemplate marriage may still be enforceable. However, if you and your partner have a Cohabitation Agreement that does not contemplate marriage, and you decide to get married in the future, the Agreement could be found to be unenforceable. Therefore, if there is a possibility that you and your partner may want to get married in the future, and you would like the provisions of your Agreement to remain the same, you should make sure there is a clause in your agreement that contemplates marriage.
- Did you provide financial disclosure?
One of the main reasons why Cohabitation Agreements and/or Marriage Contracts are found to be unenforceable is because of lack of financial disclosure. You and your partner cannot make an informed decision about whether you should agree to certain provisions of the document (nor can you obtain proper legal advice) if you are unaware of all the assets and debts owned by each of you. If you want to make sure your Cohabitation Agreement or Marriage Contract is enforceable, you should always provide full disclosure of the assets and debts in each of your names.
- Did you receive Independent Legal Advice?
Another reason why contracts and/or agreements can be found to be unenforceable is lack of independent legal advice. You and your partner should each retain the services of a lawyer to review the Cohabitation Agreement and/or Marriage Contract to advise you of your rights prior to signing either of these documents.
- Was it signed under duress?
The state of mind of each party at the time of signing the Cohabitation Agreement or Marriage Contract can also affect its enforceability. For example, if you present your partner with a Marriage Contract the night prior to your wedding and tell him or her you will not get married if they do not sign it, your Contract may be found to be unenforceable. You should ensure each of you have had a chance to contemplate the provisions of the document, have had a chance to obtain independent legal advice, and are signing the document voluntarily and with a clear mind.
- Is it “unfair and unconscionable”?
If the Cohabitation Agreement or Marriage Contract is heavily weighed in one party’s favour for no reason, the document could be found to be unenforceable. What constitutes an Agreement or a Contract to be “unfair” and/or “unconscionable” is determined on a case by case basis. If you and your partner receive independent legal advice prior to signing either of these documents, your legal counsel will be able to advise you accordingly.
If you have a Cohabitation Agreement or a Marriage Contract and would like advice on the validity or enforceability of this contract, or if you would like a lawyer to draft a Cohabitation Agreement or a Marriage Contract for you, please do not hesitate to contact MDW Law. One of our lawyers would be more than happy to assist you.