Marriage contracts, also known as prenuptial, separation or divorce agreements, are legal documents that outline the division of assets and responsibilities in the event of a separation or divorce.

In Canada, these contracts are governed by family law legislations and can be set aside under certain circumstances.

This article explores the grounds for setting aside a marriage contract through recent Supreme Court of Canada decisions, particularly focusing on the cases of Anderson v. Anderson, 2023 SCC 13 and Miglin v. Miglin, 2003 SCC 24. We will discuss the principles and examples provided by these cases to offer a clear understanding of how and why a marriage contract might be invalidated.

The Basics of Marriage Contracts

Previously, we answered certain questions related to the basic elements of marriage contracts. Marriage contracts are designed to provide clarity and predictability regarding the division of property and other issues should a marriage end. In Canada, these agreements can be executed before marriage (prenuptial agreements) or after marriage (postnuptial agreements). These contracts are generally enforceable if they meet the legal requirements of formation, which include:

– Mutual Consent: Both parties must willingly agree to the terms.

– Full Disclosure: Both parties must fully disclose their assets and liabilities.

– Fairness: The terms should be fair and reasonable at the time of enforcement.

Grounds for Setting Aside a Marriage Contract

If there are problems in the formation of a marriage contract, despite the initial enforceability, there are circumstances under which a marriage contract can be set aside. Key grounds include:

1. Lack of Proper Disclosure;

2. Unconscionability;

3. Duress or Undue Influence; and

4. Changed Circumstances.

Let’s delve into these grounds with specific reference to the Anderson v. Anderson, 2023 SCC 13 and Miglin v. Miglin, 2003 SCC 24 decisions.

1. Lack of Proper Disclosure

One of the fundamental requirements for a valid marriage contract is full and honest disclosure of assets (including offshore assets) and liabilities (such as debts). If one party fails to disclose significant information, the contract may be invalidated.

In Anderson v. Anderson, 2023 SCC 13, at the end of a three‑year marriage, the wife and the husband executed a separation agreement which essentially provided that each party would keep the property held in their name and give up all rights to the other’s property, except for the family home and the household goods. The agreement, prepared by the wife, was executed at the end of a meeting with 2 friends of the parties, who witnessed its execution. There was no financial disclosure between the parties and neither party had the benefit of independent legal advice before signing. Nearly 17 months after the wife petitioned for divorce, the husband counter‑petitioned and sought family property division, arguing that the agreement was signed without legal advice and under duress.

The Supreme Court of Canada highlighted the importance of disclosure (paragraphs 64-68). In this case, the Court emphasized the principle that parties must provide a clear and comprehensive account of their financial situations. The failure to do so can lead to a contract being set aside. If one party conceals assets or misrepresents their financial situation, the contract might be contested successfully. This principle then needs to be assessed in the circumstance in which the contract was negotiated.

The Court found that in this case, the agreement was binding and there were no substantiated concerns with its fairness as it met the following criteria: the agreement is short and uncomplicated and reflects the intention of the parties to effect a clean break from their partnership.

A lack of independent legal advice and formal disclosure can undermine informed choice, but was not troubling here because the husband could not point to any resulting prejudice: there was no suggestion that the absence of these safeguards undermined either the integrity of the bargaining process or the fairness of the agreement. The agreement was therefore entitled to serious consideration given that it reflects the parties’ understanding of what division of property was fair in the context of their relationship at the time of separation.

Even when no formal disclosure was made, the parties were best positioned to organize the limited family property resulting from their short marriage and, given all the circumstances, the most fair and equitable solution is for their simple agreement to be given effect.

2. Unconscionability

A marriage contract may also be set aside if its terms are deemed unconscionable. This means the terms are so unfair that they shock the conscience of the court.

In Miglin v. Miglin, 2003 SCC 24, the Supreme Court of Canada addressed (in paragraphs 225-226, 228) unconscionability in the context of a marriage contract. The case involved a 14-year marriage with children, the need for spousal support and real properties; the wife argued that the marriage contract’s terms were overly harsh and not reflective of current circumstances. The Supreme Court of Canada determined that the separation agreement should be accorded significant and determinative weight.

At the time of its formation in this case, nothing in the surrounding circumstances indicated that the negotiations or execution of the separation agreement were fraught with vulnerabilities: both parties had engaged the services of expert counsel and negotiations persisted over a lengthy period.  Likewise, nothing in the substance of the agreement demonstrated a significant departure from the overall objectives of the Divorce Act.

The division of assets in the agreement reflected the parties’ needs and wishes at the time and fairly distributed the assets acquired and created by them over the course of their marriage. Moreover, the quantum of child support was arrived at in full contemplation of the wife’s spousal support release.  The quantum of child support established in the agreement was intended to provide the wife with a minimum amount of income in contemplation of her not working.

In essence, if a contract creates an inequitable situation for one party, it might be subject to judicial intervention and potential invalidation. The key considerations in preparing a marriage agreement, here, is an understanding of the objectives of the Divorce Act and Family Law Act to ensure, in the circumstances, the agreement is fair and equitable.

3. Duress or Undue Influence

For a marriage contract to be valid, it must be entered into voluntarily without any form of coercion or undue influence. If one party was forced or pressured into signing the contract, it may be set aside.

In Anderson v. Anderson, 2023 SCC 13, the Supreme Court of Canada examined allegations of duress. The petitioner argued that they were coerced into signing the contract under pressure from their spouse. Undue influence can manifest in various ways, such as emotional manipulation or threats, which undermine the voluntariness of the agreement. The Court did not find these allegations to be factually proven, as they parties intended to sign a short agreement, without formal disclosure.

4. Changed Circumstances

A marriage contract may also be set aside if there have been significant changes in circumstances that make the contract’s terms no longer reasonable or applicable.

In Miglin v. Miglin, 2003 SCC 24, the Supreme Court acknowledged that changing circumstances could affect the enforceability of a contract. The case involved a claim that changes in the couple’s financial situation warranted a review of the contract’s terms. The Court noted:

91.  Although we recognize the unique nature of separation agreements and their differences from commercial contracts, they are contracts nonetheless. Parties must take responsibility for the contract they execute as well as for their own lives. It is only where the current circumstances represent a significant departure from the range of reasonable outcomes anticipated by the parties, in a manner that puts them at odds with the objectives of the Act, that the court may be persuaded to give the agreement little weight. … As La Forest J. said in his dissent in Richardson, supra, at p. 881, an order made under the Act has already been judicially determined to be fit and just.  The objectives of finality and certainty noted above caution against too broad a discretion in varying an order that the parties have been relying on in arranging their affairs.  Consideration of the overall objectives of the Act is consistent with the non-exhaustive direction in s. 17(7) that a variation order “should” consider the four objectives listed there.  More generally, a contextual approach to interpretation, reading the entire Act, would indicate that the court would apply those objectives in light of the entire statute.  Where the order at issue incorporated the mutually acceptable agreement of the parties, that order reflected the parties’ understanding of what constituted an equitable sharing of the economic consequences of the marriage.  In our view, whether acting under s. 15.2 or under s. 17, the Court should take that into consideration.

When circumstances evolve—such as a substantial change in income or health—parties might seek to have the contract adjusted or set aside if it no longer reflects their situation. To revisit a marriage contract in this regard, the principles in the Divorce Act including of certainty, finality and negotiated settlements. The parties’ arrangements sought to redress any disadvantages arising from the marriage while facilitating a disentanglement of their economic lives and promoting finality, autonomy, and self‑sufficiency.

The wife’s evidence regarding her circumstances at the time of her support application failed to demonstrate that the separation agreement was fairly negotiated and was substantially compliant with the objectives of the Divorce Act at its formation. Therefore, the Court did not set aside the spousal support aspect of the couple’s agreement.

Key Takeaways for Setting Aside a Marriage Contract

Marriage contracts serve a crucial role in defining the terms of separation and protecting the interests of both parties. However, they are not immune to scrutiny. The Supreme Court of Canada has established that these contracts can be set aside on several grounds, including lack of proper disclosure, unconscionability, duress or undue influence, and changed circumstances.

The cases of Anderson v. Anderson, 2023 SCC 13and Miglin v. Miglin, 2003 SCC 24 provide important precedents in understanding these grounds. They illustrate how the courts assess the validity of marriage contracts and ensure that they uphold principles of fairness and equity.

Understanding these principles can help individuals approach marriage contracts with greater clarity, certainty and finality, ensuring that such agreements are both fair and enforceable.

Contact Roland Luo in Vancouver for Trusted Guidance in Family Law Disputes

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