When couples enter into a cohabitation agreement or separation agreement, they are often trying to create certainty during an emotionally difficult time. These agreements can address important issues such as property division, support obligations, debt allocation, and parenting arrangements.
However, many people are surprised to learn that simply signing an agreement does not automatically make it enforceable.
In Ontario, courts can set aside all or part of a domestic contract if it was negotiated unfairly, signed under pressure, or based on incomplete financial information. One of the most common reasons agreements fail is inadequate financial disclosure.
What Is a Cohabitation or Separation Agreement?
A cohabitation agreement is entered into before or during a common law relationship and typically addresses how finances and property will be handled during the relationship and if the parties separate.
A separation agreement is signed after separation and commonly deals with:
- parenting arrangements,
- child support,
- spousal support,
- division of property,
- responsibility for debts, and
- future dispute resolution.
Both types of agreements are governed by the Family Law Act and must comply with certain legal requirements to be enforceable.
The Most Important Ingredient: Full Financial Disclosure
Financial disclosure is the foundation of any enforceable domestic contract. Before signing an agreement, both parties should fully and honestly disclose their financial circumstances.
This includes:
- income,
- bank accounts,
- pensions,
- investments,
- real estate,
- corporations or business interests,
- debts and liabilities, and
- other significant assets.
Without complete disclosure, neither party can properly assess whether the agreement is fair or whether they are making an informed decision about their legal rights.
Courts take this obligation seriously. If one party later discovers hidden assets, undisclosed income, or inaccurate financial information, the agreement may be challenged and potentially set aside.
Why Financial Disclosure Matters
- Allows Informed Decision-Making
A person cannot meaningfully waive rights or negotiate support without understanding the other party’s financial position.
For example:
- A spouse may agree to waive spousal support without realizing the other party earns significantly more than disclosed.
- A party may accept less property division because they were unaware of investments or business assets.
An agreement based on incomplete information is vulnerable to attack.
- Helps Prevent Future Litigation
Many people enter agreements hoping to avoid court proceedings later. Proper disclosure reduces the likelihood of future disputes because both parties have a clear understanding of the financial landscape at the time the agreement is signed.
Investing time in proper disclosure upfront can save substantial legal costs later.
- Courts Expect Transparency
Ontario courts recognize domestic contracts as important tools that allow parties to resolve matters privately. However, courts will intervene where the negotiation process was fundamentally unfair.
Under the Family Law Act, a court may set aside a domestic contract where:
- a party failed to disclose significant assets or debts,
- one party did not understand the nature or consequences of the agreement, or
- the agreement was otherwise obtained improperly.
Financial disclosure is therefore not simply a formality. It is essential to the integrity of the agreement itself.
Independent Legal Advice Is Also Critical
In addition to financial disclosure, each party should obtain independent legal advice before signing.
Independent legal advice helps demonstrate that:
- both parties understood their rights,
- the agreement was entered voluntarily,
- no one was pressured into signing, and
- the legal consequences were explained.
While not strictly required by law, agreements are significantly more likely to withstand court scrutiny when both parties had separate lawyers.
Common Mistakes That Can Make an Agreement Unenforceable
Some of the most common problems include:
- failing to exchange financial disclosure,
- using vague or unclear language,
- signing under pressure or time constraints,
- failing to properly witness signatures,
- attempting to contract out of child support obligations, or
- using outdated agreements after major life changes.
Even well-intentioned agreements can become problematic if they are not carefully prepared.
Conclusion
A cohabitation agreement or separation agreement can provide clarity, stability, and protection during uncertain times. However, the enforceability of the agreement depends not only on what the document says, but also on how it was negotiated and executed.
Full financial disclosure is one of the most important parts of that process. Transparency allows parties to make informed decisions, reduces the risk of future litigation, and greatly increases the likelihood that a court will uphold the agreement if challenged later.
When preparing any domestic contract, parties should ensure that disclosure is complete, the terms are carefully drafted, and both sides obtain independent legal advice before signing.
The content on this post is for information purposes only and is not legal advice, which cannot be given without knowing the facts of a specific situation. You should never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. The use of the website does not establish a solicitor and client relationship.