Miglin v Miglin, [2003] 1 S.C.R. 303 is an important decision by the Supreme Court of Canada that sets out the test for whether a domestic contract – for instance, a separation agreement, a marriage contract, or a cohabitation agreement – is valid.

In this case, the couple negotiated a separation agreement. Almost five years later, she went to court to try to change the agreement.

At issue in the case were the competing values of sanctity of contract versus the parties’ interdependence and unequal bargaining power. The majority of the Supreme Court sided with sanctity of contract, and laid out a two part test to determine whether a domestic contract is valid.

Two-part Test

Step 1 – Was the domestic contract unimpeachably negotiated?

Here the court is not just looking at the substance of the agreement, but also the circumstances surrounding the parties entering into the agreement.

In terms of the circumstances surrounding the parties entering into the agreement, a court will consider a number of factors, including:

• Independent legal advice from a lawyer. This is not required, but is certainly very helpful in showing that an agreement was unimpeachably negotiated.
• Was one party in a vulnerable position. This item ties in with (a), as a lawyer can act to rectify a party’s vulnerability.
• Was the agreement negotiated over a reasonable amount of time. There is no bright-line test as to what a reasonable amount of time is. Certainly, first presenting a marriage contract to your partner the night before a wedding and asking your partner to sign before the wedding would likely be considered an unreasonable amount of time. But every situation will need to be judged in the totality of its circumstances.

Step 2 – Were the current circumstances anticipated when the agreement was drafted?

Here, the court is looking at whether the circumstances the parties find themselves in were foreseeable, not necessarily that the parties explicitly considered the current circumstances. So, for instance, it may be foreseeable that people change jobs, lose jobs, assets may go down in value, people retire, and so forth.

To succeed at this step, a party would need to show that the outcome of enforcing the agreement was quite different from what the parties anticipated when they entered into the Agreement.

How to ensure that your agreement meets the Miglin test?

I know that this sounds self-serving, but the best way to do this is to ensure that both parties are represented by lawyers. Lawyers will make sure that:

• the terms of the domestic contract in compliance with the objectives of the Divorce Act, Family Law Act, and Succession Law Reform Act;
• the procedure followed is appropriate; and
• any imbalance in power between the parties is rectified.

What puts an agreement at risk of not being upheld?

Both parties not having lawyers is the biggest risk factor. However, an agreement can be at risk even if both parties have lawyers, if circumstances develop that were not reasonably anticipated.

Note that even if the court decides that a domestic contract should be changed, they will not disregard the agreement completely. What is in the agreement will still be a factor that is considered in deciding that appropriate outcome.