Contracts in Family Law: Can Counsel Bind their Clients? And What Counts as a Binding Agreement?

Whether first year Contract Law was your best or worst law school subject, contracts are infused into all areas of legal practise. This is no more apparent than when counsel are coming to terms of an agreement, including in divorce.

The law of contracts may seem simple; “If there is a written contract whose wording reveals a plain and unambiguous intention, that will ordinarily be the end of the matter”[1], but what happens when two lawyers disagree on whether or not an agreement was actually reached?

Alberta courts have encountered this very issue. In Scott v Scott, 2021 ABQB 216 [Scott] the applicant’s position was that the parties’ counsel had arrived at a binding agreement through the exchange of letters. The Respondent, however, had refused to sign the agreement which was drafted in accordance.

The Alberta court applied the Ontario decision of Bawitko Investments Ltd. v Kernels Popcorn Ltd., 1991 CanLII 2734 (ONCA) for the following:

• When there is agreement on all of the essential provisions to be incorporated in a formal document, with the intention that the agreement shall be binding, there is a contract.
• However, when the original contract is incomplete, vague, etc. there is no contract.

The following Alberta decision, RMB v RJJG, 2019 ABQB 591, was also cited for the following:

• A court must analyze whether the contract specifically contemplates the execution of a formal contract; if it is a condition or term, then the document merely reflects an agreement to agree and there is no enforceable contract. If it is an expression of desire, then there is a binding contract and the reference to a formal document can be ignored.

Contracts in a Family Law Context

In conclusion, the court in Scott held that the court must “be satisfied that the parties intended to contract and that the essential terms of their agreement were clear within the context known to the parties” (see para 19).  Where there is “a comprehensive, global settlement addressing all matrimonial issues between the parties” a contract is reached.

The enforceability of a contract is at risk, however, if not all issues are addressed or if there is an agreement to deal with the issues at a later date. This may simply be an offer or an agreement to agree, and not a binding contract.

The court in Scott also clarified that at least in the family law context, a solicitor of record has the “ostensible authority” to bind his or her clients. Therefore, correspondence between counsel may very well be enough to come to binding terms of an agreement.

When determining how to interpret a contract in the family law context, courts will rely on an analysis of the following:

• The parties’ intentions;
• The plain and ordinary meaning of the language used;
• The context within the contract as a whole;
• The circumstances in which the language was used; and
• Extrinsic evidence including the history between the parties.

As was held in Laverdiere v Laverdiere, 2000 ABQB 435, the court “cannot change the language, but it may give the words a broad interpretation to achieve the aim and purpose of the parties”.

For further questions on contract law in the context of family disputes, contact one of our experienced family lawyers!

[1] Warren H.O. Mueller, B.A., LL.B., LL.M., Q.C. of the Ontario Bar, and D. Morgan, B.A., LL.B, LL.M, “Contracts” (N.D.), online: Thomson Reuters WestLaw Canada < https://www.westlawcanada.com/academic/ced/contracts/>.