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Domestic Contracts Across Borders

There are many considerations that go into deciding to relocate to a new jurisdiction. What may not be so apparent, or unfortunately what may even be at the bottom of the to-do list, is ensuring any legal documentation is effective. It may come as a surprise to individuals moving to Ontario that a marriage contract or cohabitation agreement (referred to in this blog collectively as a “domestic contract”) executed in their home jurisdiction no longer works.

The validity requirements of a domestic contract may vary from jurisdiction to jurisdiction. Additionally, key aspects of Ontario domestic contracts, including the need for full and frank disclosure, are not requirements across the globe. The absence of these components may put the validity and enforceability of a domestic contract or a provision in it in jeopardy in Ontario.

If having a valid domestic contract is a requirement of a shareholder or partnership agreement, an invalid domestic contract may be a breach of such agreement resulting in further complications.

Under Ontario’s Family Law Act, the manner and formalities of making a domestic contract outside of Ontario and its essential validity and effect are governed by the proper law of the contract. The proper law of the contract is the law of the jurisdiction that the parties choose as the law governing their contract or, in the absence of such choice, the jurisdiction with which the contract has its closest connection. However, a contract of which the proper law is that of a foreign jurisdiction is valid and enforceable in Ontario only if entered into in accordance with Ontario’s internal law.

In Ontario, to be valid, a domestic contract must be:

  • In writing;
  • Signed by the parties; and
  • Witnessed.

An Ontario court may set aside a domestic contract or a provision in it for the following reasons:

  • If a party failed to disclose their significant assets, debts, and liabilities existing at the date the domestic contract was made;
  • If a party did not understand the nature or consequences of the domestic contract; or
  • If there are grounds to set aside the domestic contract in accordance with contract law.

For example, in France, French law does not require parties to a marriage contract (referred to as a contrat de marriage) to receive separate and independent legal advice at the time of entering into the contract nor does French law require full disclosure of assets. In Ontario, a domestic contract may be set aside if there was not full disclosure of assets. As well, although the legislation does not stipulate that each party has independent legal advice, the established practice is to ensure each party has it to prevent claims that a party did not understand the contract or that the contract was not entered into voluntarily and freely.

An Ontario court may also set aside a provision for support or waiver of the right to support in a domestic contract, including a foreign domestic contract, if:

  • The provision for support or the waiver of the right to support results in unconscionable circumstances;
  • The provision for support is in favour of or the waiver is by or on behalf of a dependant who qualifies for an allowance for support out of public money; or
  • There is default in the payment of support under the contract at the time the application is made.

Additionally, a provision in a domestic contract relating to the right to custody of or access to children or which interferes with possession of a matrimonial home is not enforceable in Ontario.

Most individuals after going through the process of preparing and executing a domestic contract put it in the back of the drawer both physically and emotionally. However, if moving to Ontario, it’s important to seek appropriate legal advice well before the move to ensure that the domestic contract will be valid and effective in the new home jurisdiction and to optimally put in place whatever may be required for such purpose.

— Marly Peikes

The comments offered in this article are meant to be general in nature, are limited to the law of Ontario, Canada, and are not intended to provide legal or tax advice on any individual situation. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your personal circumstances.