Binding Financial Agreements
The Family Law Act 1975 authorises parties who are married or in a de facto relationship to create a legally binding agreement in relation to property, finances, superannuation and spousal maintenance to be applied if their relationship should end.
What do Binding Financial Agreements Do?
A BFA allows parties to make an agreement in relation to their finances. Ultimately, a Binding Financial Agreement is intended to ensure parties do not have to enter court proceedings to work out property and financial matters. A BFA created by the two parties alone will not be legally binding. This is because a requirement for Binding Financial Agreements to come under the scope of the Family Law Act is that both parties must have signed the agreement after receiving independent advice about the nature and scope of the BFA. This must include independent legal and financial advice. For this reason, it is vital you speak to a family lawyer before creating a BFA. In addition, your lawyer can assist in the creation of the BFA to remove any possible loop-holes and ensure the BFA is contractually sound and fair to both parties.
When can a Binding Financial Agreement be set aside?
A court can set aside a BFA for several reasons authorised by section 90K of the Family Law Act. These can include:
- Fraud: this includes non-disclosure of some material matter that defrauds the other party
- To avoid creditors: a BFA will be set aside where it is found it was for the purpose of defrauding creditors to one or both of the parties
- Void or unenforceable: due to a contractual principle such as mistake, misrepresentation, public policy, uncertainty, incompleteness, duress, undue influence, unconscionability, breach, waiver, or estoppel
- Impractical: where the parties’ circumstances have changed since the BFA was entered that would make applying the BFA impracticable
- Hardship due to children: if a material change in circumstances has arisen that relates to the welfare or care of a child of the relationship and the child, or the responsibility of caring for the child, will cause hardship
- Unconscionable conduct: if one or more parties has engaged in unconscionable conduct
- Other parties’ interests: To protect the interests of parties in other relationships with a party signing the financial agreement
Courts are still reasonably strict when it comes to the legislative requirements for creating a BFA. This means that it is still imperative that you seek legal advice before entering into a BFA in order to ensure that it is binding should the unfortunate situation of a relationship breakdown ever arise.
If you are thinking of entering into a Binding Financial Agreement, need independent legal advice before signing one, or are considering separation or divorce, contact our family law team on 02 8917 8700 or fill out the enquiry box and we will get back to you ASAP.