“Section 53(2) of the Family Law Act provides that regardless of whether contemplated at the time, when parties to a cohabitation agreement marry, the agreement shall be deemed to be a marriage contract.
Per section 56(4):
A court may, on application, set aside a domestic contract or a provision in it,
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract. R.S.O. 1990, c. F.3, s. 56 (4).
As a general rule, courts will uphold the terms of a valid enforceable domestic contract: Hartshorne v. Hartshorne, 2004 CarswellBC 603 (S.C.C.)
It is desirable that parties settle their own affairs: Farquar v. Farquar (1983), 35 R.F.L. (2d) 287 (Ont. C.A.) and courts are generally loathe to set aside domestic contracts. See page 297:
the settlement of matrimonial disputes can only be encouraged if the parties can expect that the terms of such settlement will be binding and will be recognized by the courts … as a general rule … courts should enforce the agreement arrived at between the parties…. The parties to the agreement need to be able to rely on [them] as final in the planning and arranging of their own future affairs
Parties are expected to use due diligence in ascertaining the facts underlying their agreements. A party cannot fail to ask the correct questions and then rely on a lack of disclosure: Clayton v. Clayton, 1998 CarswellOnt 2088 (Ont. Gen. Div.).
A domestic contract will be set aside when a party was unable to protect his or herself. Such cases are generally predicated upon a finding that one party has preyed upon the other, or acted in a manner to deprive the other of the ability to understand the circumstances of the agreement.
The court is less likely to interfere when the party seeking to set aside the agreement is not the victim of the other, but rather his or her own failure to self-protect. The Ontario Court of Appeal in Mundinger v. Mundinger (1968), [1969] 1 O.R. 606 (Ont. C.A.) says that the court will step in to “protect him, not against his own folly or carelessness, but against his being taken advantage of by those in a position to do so because of their position.”
The court must look not at which party made the better bargain but rather, to whether one party took advantage of their ability to make a better bargain. In that taking of advantage is to be found the possibility of unconscionability. See Rosen v. Rosen (1994), 3 R.F.L. (4th) 267 (Ont. C.A.)
The test for unconscionability is not weighing the end result, but rather the taking advantage of any party due to the unequal positions of the parties. See Mundinger v. Mundinger (1968), [1969] 1 O.R. 606 (Ont. C.A.); Rosen v. Rosen (1994), 3 R.F.L. (4th) 267 (Ont. C.A.).
The onus is on the party seeking to set aside the domestic contract to demonstrate that at least one of the circumstances set out in subsection 56(4) has been met; then the court must determine whether the circumstances complained of justify the exercise of the court’s discretion in favour of setting aside the contract. It is a discretionary exercise. See LeVan v. LeVan, 2008 CarswellOnt 2738 (Ont. C.A.).
A finding that a party violated a provision of s. 56(4) of the FLA does not automatically render the contract a nullity. Rather, a trial judge must determine whether it is appropriate, in the circumstances, to order that the contract be set aside. It is a discretionary exercise: LeVan paragraph 33.
The lack of independent legal advice is not by itself determinative. It is only one factor: Dougherty v. Dougherty, 2008 CarswellOnt 2203 (Ont. C.A.); Raaymakers v. Green, 2004 CarswellOnt 2712 (Ont. S.C.J.)”