In British Columbia, both cohabitation agreements and pre-nuptial agreements (“Family Agreements”) are recognized and enforced by law.
What is a Cohabitation Agreement?
A cohabitation agreement is a legal agreement between two people who are living together or planning to live together but are not married. This agreement outlines how property and debts will be divided if the relationship ends, as well as other issues such as spousal support and child custody. Cohabitation agreements can be useful for protecting individual assets and avoiding disputes in case of separation.
What is a Pre-Nuptial Agreement?
Similarly, a pre-nuptial agreement is a legal agreement made between two people who plan to marry. This agreement outlines how property and debts will be divided in the event of a divorce, as well as other issues such as spousal support and child custody. Pre-nuptial agreements can also be useful for protecting individual assets and avoiding disputes in case of separation.
Requirements for Family Agreements
Both cohabitation agreements and pre-nuptial agreements must meet certain requirements in order to be enforceable in British Columbia. These requirements include:
- The agreement must be in writing and signed by both parties;
- Both parties must have received independent legal advice before signing the agreement; and
- The agreement must be fair and reasonable at the time it was signed.
If these requirements are met, the cohabitation agreement or pre-nuptial agreement will be enforceable in court. It is important to note that these agreements can be challenged in court if one party can prove that they were signed under duress or that there was a lack of full disclosure of assets or debts at the time the agreement was signed.
Factors Courts Consider when Setting Aside Family Agreements
In determining whether to set aside or cancel a family agreement, the court will apply a two-stage inquiry. The first stage includes assessing the procedural and substantive fairness of the agreement, while the second stage focuses on the events that occur after the parties entered into the agreement. Important cases where the court has applied this two-stage inquiry include: Reiner v. Reiner, 2021 BCSC 1514; Miglin v. Miglin, 2003 SCC 24; and Reid v. Reid, 2017 BCCA 73.
On the assessment of procedural fairness, and as provided in Reiner at para 14, the court will look to the circumstances that existed when the parties entered into the agreement, while focusing on the following:
- whether there were any circumstances of oppression, pressure, or other vulnerabilities;
- the conditions under which the negotiations were held;
- whether a party suffered from informational deficits of the other party’s making;
- whether there was professional assistance; and
- whether one party exploited an unfair negotiating advantage.
On the assessment of substantive fairness, the court will focus on the factors in Sections 93(3) and (5) of the Family Law Act. These subsections codify factors that the courts have considered when setting aside agreements, including:
- failure to disclose relevant information;
- improper advantage; and
- failure to understand the nature or consequences of the agreement.
Alternatively, the Supreme Court may set aside or replace the agreement with an order for all or part of the agreement if it is satisfied that the agreement is significantly unfair on consideration of the following factors detailed under Section 93(5) of the Family Law Act:
- the length of time that has passed since the agreement was made;
- the intention of the spouses, in making the agreement, to achieve certainty;
- the degree to which the spouses relied on the terms of the agreement; and
- other circumstances that give rise to common-law defences.
Independent Legal Advice (ILA)
There is no explicit provision in the Family Law Act requiring parties to obtain independent legal advice (ILA) before signing an agreement. However, Section 93(3)(c) of the Family Law Act, allows the court to consider whether a spouse understood the nature or consequences of a cohabitation or pre-nuptial agreement. Failure to obtain or receive ILA is a factor relating to whether a spouse understood the nature and consequences of an agreement. However, courts have refused to set aside agreements where the parties received ILA from experienced counsel.
The receipt of inadequate ILA can be the basis for setting aside an agreement; however, when parties understand the nature and consequences of the agreements they sign, a lack of ILA alone is often insufficient grounds to set aside a family agreement. Due to the lack of explicit reference to ILA in the Family Law Act, the courts will continue to focus on what a party actually understood and the nature and consequences of the agreement, as opposed to inferring that a lack of ILA is synonymous with a lack of understanding.
Common Law Defences to Family Agreements
Under Sections 93(3)(d) and 164(3)(d) of the Family Law Act, “circumstances that would, under the common law, cause all or part of a contract to be voidable” can be considered by the Supreme Court on an application by a spouse to set aside or replace an agreement respecting property division or spousal support with an order. The common-law defences to contract include:
- unconscionability;
- mistake;
- uncertainty; and
- duress/undue influence.
In Rich v Brandsema, 2009 SCC 10, the Supreme Court of Canada affirmed that the common-law defences to contract are available for agreements, the terms of which have been incorporated into a consent order.
It is recommended that anyone considering a cohabitation agreement or pre-nuptial agreement seek professional legal advice to ensure that their agreement meets all legal requirements and is enforceable in court.
The legal coaches at Coach My Case have extensive experience drafting cohabitation agreements and pre-nuptial agreements and can help you understand your rights and responsibilities should you require independent legal advice. Contact us today to book a free consultation to learn more.
