A domestic contract is a legally binding agreement made between two individuals. These types of contracts allow individuals the opportunity to define their relationship as they wish, and to outline their rights and responsibilities to each other.
There are four main types of domestic contracts:
This article will focus only on the first three types of domestic contracts. We will discuss what they are, their pros and cons, and why it is important for an individual to draft these contracts.
Let us begin by outlining some of the general benefits and concerns with drafting domestic contracts. This is a non-exhaustive list.
Section 53(1) of the Family Law Act (hereinafter referred to as the “Act”) states that any two individuals who are “cohabiting” or plan to “cohabit” together, but who do not intend to legally marry, may enter into an agreement. This agreement sets out their rights and obligation to each other during their cohabitation, and after they cease to cohabit together. Section 53(2) of the Act states that if parties marry each other, then the cohabitation agreement is deemed to be a “marriage contract”.
The two parties can decide on the following four issues in their cohabitation agreement:
(Section 53(1)(a)-(d) of the Act )
A cohabitation agreement is arguably more important than a marriage contact because parts of the Act, such as Part II of the Act (Matrimonial Home) only apply to married spouses. This means that individuals who are in a common-law relationship must ensure that their rights are protected through a well-drafted, legally binding, and fair cohabitation agreement. Finally, individuals can “opt-in” (be legally bound) by the Act in a cohabitation agreement.
Section 52(1) of the Act states that any two individuals who are married or who intend to marry each other may enter into an agreement, in which they settle on their respective rights and obligation to each other upon the dissolution of their marriage.
Individuals can decide on the following four issues in their marriage contract:
1. Ownership and or division of property
a. Important to note that individuals can contract out of the equalization regime set out in Part I of the Act
2. Support obligation they have to or against each other
3. The right to decide the education and moral training of their children(s)
a. However, they are not allowed to decide who will have “custody” or “access” to their children(s)
4. Any other issues in reaching a settlement.
(Section 52(1)(a)-(d) of the Act)
A marriage contract cannot limit a spouse’s right under Part II (Matrimonial Home) of the Act (section 52(2) Act). However, this exception applies only with respect to a married spouse’s possessory rights to his or her matrimonial home. In other words, a married spouse cannot be forced to vacate his or her matrimonial home, even upon separation, unless a court order states otherwise. Both individuals are equally entitled to physically stay on the property (i.e. possession rights regarding the matrimonial home). Married spouses are free to contract out of any ownership or equalization regime regarding the matrimonial home.
Section 54 of the Act states that “[t]wo individual who cohabited and are living separate and apart may enter into an agreement in which they agree on their respective rights and obligations, […]” upon the dissolution of their marriage and or relationship.
Individuals can decide on the following five issues in their separation agreement:
1. Ownership and or division of property
2. Support obligation they have to or against each other
3. The right to decide the education and moral training of their children(s)
4. The right to decide on who will have custody and access to their children(s)
5. Any other issues in reaching a settlement.
(Section 54(a)-(e) of the Act)
The main benefit of drafting a separation agreement is that it makes the divorce process much easier, faster, more flexible, cheaper, and individually tailored. Individuals can limit the issues to be litigated in front of a Judge by either settling minor issues and narrowing or reaching an amicable agreement on major or more complicated issues. A well-drafted and fair separation agreement also promotes effective co-parenting and fosters relationships among the parties and their family members.
In a perfect world, there would be no need for individuals to consider drafting any domestic contracts. Partners would act rationally, fairly, and reach a reasonable agreement quickly. However, in reality, family disputes tend to be very complex and emotional. Well drafted domestic contracts attempt to combat some of these issues and help individuals reach a fair agreement.