Separation agreements are like other negotiated contracts: They contain terms that bind the parties to specific roles and usually settle their disputes – in this case, their short-term Family Law disputes.
What’s important to know, is that – in line with Basic Contract Law 101 – when a Separation Agreement contains conditions, these must also be adhered to, or the entire agreement can fall apart. That is, unless there has been a waiver of those conditions – either expressly, or sometimes by the party’s own conduct.
This was the scenario in a case called Khani v. Araghi. The husband was a chiropractor, and the wife was a doctor. When they separated after 13 years of marriage and four children together, they needed to decide how to deal with a shared office building they owned through a corporation, from which they had been conducting their respective practices. It was ultimately sold to a third party, but the former couple disagreed on how to split the proceeds.
They decided to negotiate a Separation Agreement. It covered their Family-related obligations (such as spousal and child support, plus parenting time) but it also included terms dealing with the corporate aspects of how to allocate the building sale proceeds. Importantly, that Separation Agreement contained certain conditions. One of them was an “escrow condition”, that required that the commercial components of the agreement had to be reviewed and approved by the wife’s corporate lawyer. The Separation Agreement would be put in escrow until that review and approval was arranged.
The wife never arranged for the lawyer’s review. In light of that omission, a dispute later arose between the parties over whether the Separation Agreement was valid at all.
The matter went to trial, where the judge ruled that the important aspects of the escrow condition had either been duly met, or else they had been waived by the wife. The judge concluded that the Separation Agreement between the parties was accordingly valid and in effect.
On later appeal, the Court of Appeal confirmed this conclusion. The trial judge had made no error in confirming the Separation Agreement’s validity.
The Appeal Court agreed that while it was technically true the wife’s corporate lawyer never reviewed or gave explicit “approval” over the commercial terms, the wife had essentially acted as if the Separation Agreement was in effect, without the need for that final review at all. As the Appeal Court recounted:
The parties made a minor amendment to that version of the agreement, and, on January 24, 2019, [the husband] Mr. Khani signed it and sent it back to [the wife] Dr. Araghi’s counsel.
Dr. Araghi did not return a countersigned copy of the agreement to Mr. Khani’s lawyer, nor did she advise whether the escrow condition had been satisfied or waived. However, she took steps that suggested that the agreement was in effect. For example, on January 30, 2019, she texted Mr. Khani stating that “the agreement [had been] signed so [there was] no going back”. On January 31, 2019, she sent a copy of the agreement to her corporate counsel that was entitled “2019-01-25 Fully Executed Separation Agreement”. That same day, Dr. Araghi’s family law lawyer wrote to Mr. Khani’s lawyer stating that “the parties [had] finally executed their separation agreement last week”, claiming that Mr. Khani was in breach of the agreement, and threatening to “[bring] a court application to take out an order reflecting the terms of this agreement”.
These actions by the wife – such as communicating that the agreement was final, and conducting herself as if it was – showed that she had waived her rights to require that additional review and “elected to proceed” with the agreement as it stood.
What’s the lesson to be learned? From the standpoint of negotiating your Separation Agreement, be aware that under certain circumstances, you might be seen as waiving some important contractual conditions, which is a situation you will want to avoid. This might lead to your being bound by a Separation Agreement you no longer want, even if all the formal legal steps were technically not completed.
For the full text of the decision, see:
Khani v. Araghi, 2025 ONCA 24 <https://canlii.ca/t/k8xc2>
