To sign or not to sign a prenuptial or cohabitation agreement during COVID lockdown

Parties usually sign marriage contracts (popularly referred to as “prenups”) or cohabitation agreements for various reasons. One of the driving reasons is a sense of control and peace of mind as to what will happen upon relationship breakdown or one of the parties having significant family wealth that they wish to protect.

The parties’ clear expectations, most often with respect to property and/or spousal support (popularly known as “alimony”), are outlined in the agreement. Down the road, this can streamline the separation and divorce process and in turn save lots of time, money and headaches.

Negotiating the agreement

In an effort to negotiate as close to a bulletproof agreement as possible, it is important for the parties to exchange financial disclosure, understand the nature or consequences of the agreement and ensure that they are entering the agreement voluntarily — free from duress, coercion, intimidation and undue influence.

Best practices also include not having a rushed negotiation but having both parties provide meaningful input and negotiating the terms instead of one party merely presenting the terms as a fait accompli. However, given that one party can seek to set aside the agreement, both the content of the agreement and the context of the negotiations are relevant considerations for the court.

Setting aside the agreement

For example, a party can try and set aside the agreement if the provision for support or the waiver of the right to support results in unconscionable circumstances. In addition, the party can seek to set it aside on the basis that:

  • the other party failed to disclose significant assets, debts or other liabilities existing when the agreement was made (i.e. lack of disclosure or non-disclosure);
  • the party did not understand the nature or consequences of the agreement; or
  • otherwise in accordance with the law of contract. The law of contract is a broader catch-all provision, which also focuses on the circumstances surrounding the formation of the agreement, including for example duress, unconscionability and undue influence.

However, even where a party successfully engages one of these grounds, the court will still consider whether it should exercise its discretion to set aside the agreement.

Entering into an agreement during the COVID lockdown

Against this backdrop, should parties be entering into prenuptial or cohabitation agreements during the COVID lockdown?

While parties are always free to do what they wish, a better course of action would be to enter into a standstill agreement during these unprecedented and challenging times.

It is known that many are struggling with adapting to the current circumstances and are experiencing upheavals in their life, including job losses, financial (in)security, pressures and worries, among other things.

Consider a standstill agreement

In addition to feelings of isolation, increased mental health issues and even the experience of increased abuse as the home is not a safe haven for all, the voluntariness and the context of negotiations could attract increased scrutiny down the line.

On the other hand, with a standstill agreement, the parties can continue their negotiations afterward in good faith when there is more of a return to “normalcy” without having the pressure of reaching an agreement in the context of the COVID lockdown and these uncertain and unprecedented times. However, where parties are adamant to enter into agreements, best practices should always be followed. It is better to set aside more time and do things properly now, than have the agreement set aside in the future with more time and more money being spent litigating something that could have been done right from the very beginning. 

Are you considering entering into a cohabitation or marriage contract in Ontario? Maleki Barristers is dedicated to a client-centred approach and is ready to help during this unprecedented time.