Binding Financial Agreements are contracts, usually between two people, that deal with the division of their property should their relationship breakdown. These agreements outline how the parties are to manage their financial affairs to avoid both parties from having to go to court in the event of separation.
Due to the nature of this type of agreement, they are governed by strict legal requirements. The Family Law Act sets out these requirements, including what each party needs to disclose and how the agreement should be drafted.
What makes a Binding Financial Agreement valid?
Section 90G of the Family Law Act states that the following must be satisfied for a Binding Financial Agreement to be valid:
- The Agreement must be signed by both parties;
- Before signing the Agreement, each party must obtain independent legal advice about:
- the effect of the Agreement on their rights; and
- the advantages and disadvantages of entering into the Agreement.
- The parties must be given signed statements to say that they have been given independent legal advice; and
- Both parties must give a copy of the signed statement of independent legal advice to the other party or their lawyer.
If the Agreement fails to meet any of these requirements, it could be ‘set aside’ (meaning deemed invalid and unenforceable) by the Family Court or Federal Circuit Court of Australia, unless it is unjust and inequitable to do so.
Under what circumstances might a Binding Financial Agreement be challenged?
Generally speaking, if the Agreement doesn’t comply with the Family Law Act (as set out above) or contravenes the general law governing the enforceability of contracts, the Agreement may be challenged. It is therefore critical that the document is drafted and executed correctly.
Section 90K and 90UM of the Family Law Act list further scenarios where a court may set the Agreement aside.
- If there is evidence to suggest one party entered the Agreement fraudulently or failed to disclose their assets and liabilities during the time the Agreement was made;
- If the Agreement was made solely to defraud a creditor or was made with reckless disregard to a creditor’s interest;
- If the Agreement is unenforceable, void, or voidable under law (due to misrepresentation, mistake, duress to public policy);
- If there has been a change in circumstances that makes it impracticable to enforce the Agreement;
- Where there have been material changes in circumstances relating to the care, welfare and development of a child of the relationship (or a child for whom one party has responsibility) which would result in hardship if the court does not set the Agreement aside;
- If a party acted unconscionably when making the Agreement; or
- If the Agreement provides for a superannuation interest that cannot be split.
When can Binding Financial Agreements be made?
Binding Financial Agreements don’t necessarily have to be drawn up before the separation occurs. Under the Family Law Act you can enter into one:
- Whilst contemplating marriage;
- Whilst contemplating a de facto relationship;
- During marriage;
- During a de facto relationship;
- After the breakdown of a marriage; or
- After separation of a de facto relationship.
If you are thinking about entering into a Binding Financial Agreement, we can help. At Cornerstone Law Offices, our lawyers will provide you with qualified advice so that you can make informed decisions.
Call us on 1300 267 637 for a complimentary consultation (or contact us by clicking here).