Binding financial agreements

Published Tuesday, 20 February 2001 by

Do you remember those American legal TV dramas that would screen whole episodes on the social dilemmas created by a prenuptial agreement? If Mary-Lou ever had an affair with another man she would be cut off without a cent etc etc etc. We would shake our heads and say, "only in America". The reality in Australia now however, is not too far dissimilar. With the introduction of new legislation financial agreements between spouses, once only looked upon by the court in terms of being just another factor to consider when determining a property settlement, will now become known as 'Binding Financial Agreements' (BFAs) and, as the term suggests, will be binding on spouses to the point where recourse may be had by either party to the court to enforce them. Binding Financial Agreements may be entered into by spouses at any time before, during and after the marriage relationship and can cover a multitude of issues relating to the spouses financial relationship including spouse maintenance and property settlement. For a BFA to be binding it must:-
  • Be in writing signed by both parties;
  • Be given (the original) to one party with a copy given to the other;
  • Specify the extent of any spousal maintenance provided;
  • Say that both parties have received specified independent legal advice and annexe a certificate of an independent lawyer to that effect.
A BFA can only be entered into between a husband and wife or couple who intend to marry who have received independent legal advice. However, there are a number of grounds on which a BFA can be made ineffective, where:
  • The BFA was obtained by fraud
  • The BFA is void or unenforceable (including if the agreement was made under duress, by mistake, and undue influence was involved)
  • It is impracticable for all or part of the BFA to be carried out
  • There has been a material change in the care of a child leading to hardship if the BFA remains
  • A party has been engaged in unconscionable conduct when making the BFA (where one spouse is at a disadvantage, the other spouse knows they are at a disadvantage and the agreement runs contrary to good conscience).
Warning! By entering into a BFA the Court is excluded from interfering with terms or changing any of the provisions in the agreement. Whilst this may be precisely what the spouses are seeking it also means that they must be very wary and very well informed before they take the plunge. The Family Court will only make orders in relation to property division in a settlement between spouses on a 'just and equitable' basis upon review of all the circumstances of the case. Once a BFA has been entered into the court will not have power to alter the provisions even if, had the matter come before the court it would have been 'just and equitable' to do so. So, whilst a BFA will be useful it may also result in an unjust result. There are also the numerous grounds (which can be quite vague and open to interpretation) upon which a BFA can be made ineffective (as described above). It is important therefore that if you are considering entering into a BFA that you consult at length with an accredited family law specialist who will be able to advise you on whether or what type of BFA is appropriate in your individual circumstances. March 2001