Pursuant to Section 56(4) of the Family Law Act, a domestic contract or a provision in it may be set aside on the basis of the following:
- If a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
- If a party did not understand the nature of consequences of the domestic contract; or
- Otherwise in accordance with the law of contract.
The Ontario Court of Appeal dealt with the issue of setting aside a marriage contract which is also a Domestic Contract the same as a Separation Agreement in a case called Levan v Levan. The court stated the following:
It is now well established that a finding that a party has violated a provision of s. 56(4) of the FLA does not automatically render the contract a nullity. Rather, a trial judge must determine whether it is appropriate, in the circumstances, to order that the contract be set aside. This is a discretionary exercise.
In Miglin v. Miglin, the Supreme Court of Canada detailed a two-stage analysis for married spouses when setting aside a domestic contract:
- “Stage one of the analysis focuses on the circumstances in which the agreement was negotiated and executed to determine whether there is any reason to discount the agreement. The substance of the agreement is then to be considered to determine the extent to which its terms are in substantial compliance with the objectives of the Divorce Act.”
- “In the second stage, the Court will consider the intentions of the parties and whether there has been significant change in circumstances such that it was reasonable unforeseeable at the time of formation.”
Determining whether a domestic contract should be set aside is a difficult process that requires consideration of various factors, including the factors I have mentioned today. If you require more information with respect to domestic contracts or the process of having one set aside, please visit our website at www.separation.ca or contact our office at 905-415-1636 to schedule a consultation.