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Was it a Separation Agreement? Or Merely an “Outline”?

Was it a Separation Agreement?  Or Merely an “Outline”?

In a decision by the Ontario Court of Appeal in a case called Ward v. Ward, the question was whether the handwritten separation agreement that the spouses had negotiated, with the assistance of their respective lawyers, was “at best, an outline” or whether it was a binding contract between them.

The facts were fairly straightforward:  The husband, a doctor, and the wife, an x-ray technologist, were married in 1988.  When they separated in 2005, they executed a memorandum of agreement (the “Agreement”), which had been prepared and handwritten by their experienced family lawyers with the assistance of chartered accountants, and had been duly witnessed by those lawyers.

However, the preamble of the Agreement specified that it was subject to counsel “working out a separation agreement [with] satisfactory language.” It then provided that the “Deal is” and enumerated the resolution of nine issues, including setting a specific figure for both the husband’s and the wife’s income, the equalization of net family property, designating just over $1 million of the husband’s assets as excluded property, setting a $250,000 payment by the husband to the wife, and the transfer of the both the matrimonial home and cottage to the husband.  After the Agreement was signed – and for a period of two years afterward, until the wife contested it – the parties conducted themselves in a manner that suggested that they considered themselves bound by this deal.

So the question for the court was whether there was a valid and enforceable Agreement between the parties.

At trial, the court held that there was not.  Finding that the handwritten document was merely an “outline”, the trial judge held that certain additional “information” (including filed financial statements), was needed in order to make the contract binding between the parties.

On subsequent appeal, however, the Court of Appeal reversed the trial judge’s findings, and declared the Agreement a valid and binding.  It reasoned that, at common law, even an informal agreement is binding if it contains all the essential terms that are intended to govern the contractual relationship – even if the parties also agree that those terms will subsequently be recorded in a more formal document.  (But note that this is different from an “agreement to agree” at a later date, which is not binding).  In other words, in some situations the execution of a later formal document is simply the “solemn record or memorial of an already completed and binding contract.”

This was one of those situations. The plain language of the Agreement’s preamble expressly stated that it was to be binding on spouses; the wording of the rest of the document demonstrated that they had reached consensus on all essential terms between them.   Moreover, their conduct afterward involved taking steps that were aimed at implementing it.

The Court of Appeal summed it up this way:

In my view, there are three reasons to conclude that the [Agreement] was binding and the proposed separation agreement that was to follow was not a condition precedent to its binding nature. First, the plain language of the preamble says so. Second, the parties reached agreement on all essential terms and the subsequent points of contention were merely incidental to or were implicit in the final agreement already reached. Third, the parties’ conduct at the time supports the conclusion that the parties had reached a final and binding settlement with the execution of the [Agreement].

Although the Court had the power to set aside the Agreement if it found that one or both of them had not understood the nature of consequences of it at signing, this was not such a case.  The Agreement was held valid.
For the full text of the decision, see:

Ward v. Ward, 2011 ONCA 178  http://canlii.ca/t/2g1mv

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders.  For more information, visit us at  www.RussellAlexander.com.