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Ontario’s Family Law Act (“FLA”) outlines some formal requirements for the enforceability of domestic contracts. In particular, these documents must be in writing, signed by the parties, and witnessed. These requirements ensure that parties understand the significance of their agreements. Yet, while these elements are generally required for an agreement to be enforceable, compliance can be relaxed in certain circumstances. Therefore, the parties must comprehensively understand their rights and obligations before courts will ease the formal requirements.
Family Law Act Ensures Some Formality in the Execution of Domestic Contracts
The case of Gallacher v. Friesen concerned the validity of a separation agreement in which the appellant’s signature was not witnessed. The court explained that the Family Law Act permits couples to “formalize their financial and familial relationships to resolve differences and avoid disputes”. Yet, the legislation does set out certain formal requirements that ensure the validity of a domestic contract. Section 55(1) of the Family Law Act states that “a domestic contract and an agreement to amend or rescind a domestic contract are unenforceable unless made in writing, signed by the parties and witnessed”.
In Bosch v. Bosch it was suggested that the legislation encourages parties to make their own arrangements rather than exhibiting a preference against domestic contracts. In Gallacher, the court recognized that the legislation ensures there is some formality in the execution of domestic contracts – in particular, these requirements provide proof that the contract was signed by the parties, and that it was entered into free from undue influence, coercion or duress.
Absence of Witness Signature Not Fatal in Finding the Agreement Valid
Despite the requirements in the Family Law Act, the court disagreed that a strict reading of section 55(1) was required. Turning to the case of Virc v. Blair, the court noted that the requirements could be relaxed if the court is satisfied that a contract was executed by the parties, that the terms are reasonable, and that there was no oppression or unfairness in the circumstances surrounding the negotiation and execution of the contract.
Given the circumstances in Gallacher, the judge concluded that the lack of a witness did not restrict a party from relying on the domestic contract and that the absence of a witness was not fatal to the validity of the agreement.
Video Recording Not a Substitute for Having Contract Witnessed
In El Rassi-Wight v. Arnold, the parties purchased a house and held the title as joint tenants. In August 2020, they signed a document that stated that the respondent transferred his interest in the property to the appellant for $10,000 and a motorcycle. However, the respondent later refused to comply with the terms of this agreement. The trial judge originally concluded the agreement did not comply with section 55(1) of the Family Law Act as the agreement was not witnessed. However, the respondent did not deny that he had signed the agreement, and there was a video recording of him signing.
The recording confirmed the respondent’s acknowledgement that he signed the August document. However, the court looked to Gallacher and noted that the section 55(1) requirements are not just to provide proof that a document was signed, but to “ensure a measure of formality in the execution of a domestic contract”. Moreover, in Virc v. Blair, the Ontario Court of Appeal noted that the provision is intended to provide “assurance that the parties were deliberate in reaching their agreement and understood the obligations being imposed.”
Formal Requirements Can be Relaxed if Conditions are Met
In this case, the court was not convinced that the trial judge made any error in concluding that the recording did not serve as a substitute for having the document witnessed. The court explained that the recording did not fully capture the discussions leading up to the document being drafted and signed. While a portion of those discussions were also separately recorded, they did cause the trial judge to have concerns about the circumstances leading up to the execution of the contract.
On appeal, the appellant questioned whether the trial judge applied an incorrect legal test when deciding whether compliance with the formalities in section 55(1) could be dispensed with. In Gallacher, the court recognized that in certain circumstances, the requirements can be relaxed if it is satisfied the parties executed the contract, the terms are reasonable, and there is no unfairness surrounding the execution of the contract. In Gallacher, the court reviewed some of the factors that may be relevant in making the determination.
Parties Must Understand Their Obligations Under the Agreement
In this case, the trial judge correctly applied those factors. The appellant also challenged the trial judge’s conclusion that the section 55(1) formalities should not be relaxed in this case given the circumstances. In weighing the issue, the trial judge found that neither party received independent legal advice before signing the document. She also found the document was vague, that important questions were left unresolved, and that the respondent did not understand some of the key terms. The trial judge explained that to forego compliance with section 55(1) both parties need to understand the agreement and the obligations it imposes, and in this case she did not believe the condition was met.
The 2023 Supreme Court of Canada decision in Anderson v. Anderson also aligned with the trial judge’s conclusions. In that case, the court remarked on the importance of statutory formalities and stated that “concern about vulnerabilities may be countered by the presence of procedural safeguards”. These include disclosure of all relevant financial disclosure and independent legal advice, which “can serve as a hallmark of a fair bargaining process”. In Anderson, it was found that an agreement that was in writing, signed, and witnessed could be enforced. It lacked a further safeguard stipulated by Saskatchewan legislation that the parties acknowledge their understanding of the agreement in the presence of a lawyer. Yet, the court determined that there was no indication the parties did not understand the terms of the agreement.
However, that was not the case here, where the trial judge in El Rassi-Wight found the respondent did not understand significant parts of the document.
Agreement Would Have Been Set Aside Even if Requirements Were Satisfied
The trial judge further concluded that, even if the document was a valid domestic contract, she would have set it aside in accordance with section 56(4) of the Family Law Act. That section enables courts to set domestic contracts aside on numerous grounds, including if “a party did not understand the nature or consequences of the domestic contract”.
The appellant argued that the trial judge placed weight on a finding that the respondent signed the document under duress when the evidence did not justify that conclusion. The court noted that a finding of duress was not required under the legislation and did not agree that the trial judge made an implicit finding that the respondent signed under duress. Instead, the trial judge’s findings that neither party reviewed financial records before signing, and that the respondent did not understand key terms provided a sufficient basis to set the agreement aside under 56(4)(b).
Parties Must Understand the Terms of an Agreement
Parties should consider the formal requirements set out in Ontario’s Family Law Act before finalizing a domestic contract. Any misunderstanding of the requirements could lead to an agreement not being enforceable. In some circumstances, the requirements may be relaxed if the courts find there was no unfairness surrounding the negotiation, but this is not guaranteed. Instead, parties should be sure they understand the agreement and obtain legal advice, which will increase the chances of an agreement being enforced.
Let the Experienced Lawyers at Johnson Miller Family Lawyers in Windsor Guide You Through Your Separation or Divorce
Navigating the issues stemming from separation and divorce can be overwhelming and confusing, which is why the skilled family lawyers at Johnson Miller Family Lawyers help clients every step of the way. We help clients understand the process and explain how the law applies to their circumstances. We provide tailored and practical advice and explain the options available to help our clients move forward after the breakdown of a relationship. To schedule a confidential consultation with one of our family lawyers, contact us online or by phone at 519.973.1500.
