Yes, a binding financial agreement can be enforced, but only if it meets strict rules in the Family Law Act 1975.
If those rules are not met, the agreement may not bind you.
Even a properly made agreement can be set aside by a court on limited grounds.
What a binding financial agreement is
A binding financial agreement is a written contract about how property and finances will be dealt with if a relationship ends.
Married couples can make one before, during or after the marriage.
De facto couples can make one before, during or after the relationship.
It can deal with all of your property and finances, or only some issues, such as spousal maintenance.
If it is binding, the court cannot make its own property orders on the matters the agreement covers.
The agreement does not need court approval.
What makes an agreement binding
For a married couple, the rules are in section 90G of the Family Law Act 1975. For a de facto couple, the rules are in section 90UJ.
In plain words, the agreement binds you only if:
- every party signs it
- before signing, each of you gets independent legal advice from a lawyer about how the agreement affects your rights, and its advantages and disadvantages for you at that time
- each of you receives a signed statement from your lawyer saying that advice was given
- a copy of each lawyer's statement is given to the other party or their lawyer
- the agreement has not been ended or set aside by a court.
Each person must have their own lawyer. One lawyer cannot advise both of you.
If a step was missed
If the advice or statement steps were not followed, the agreement can still be binding in some cases.
A party who wants to enforce it can ask the court to declare it binding.
The court will only do so if it is satisfied that it would be unjust and inequitable for the agreement not to bind you.
Do not rely on this. Follow every step when the agreement is made.
When a court can set an agreement aside
A court can set aside an agreement only on the grounds in section 90K (married) or section 90UM (de facto). In plain words, these include:
- Fraud. This includes one party not telling the other about something important, such as an asset.
- The agreement was made to defeat creditors, or with reckless disregard for creditors.
- The agreement was made to defeat the interests of a de facto partner of one of the parties.
- The agreement is void, voidable or unenforceable under the general law of contracts.
- Circumstances have changed since it was made, so that it is now impracticable to carry out all or part of it.
- There has been a material change in the care, welfare or development of a child, and the child or the carer would suffer hardship if the agreement stays in place.
- A party acted unconscionably when the agreement was made, for example by taking unfair advantage of the other person's position.
There are also grounds that relate to superannuation in some cases.
Binding financial agreement or consent orders
After separation, consent orders are the other common way to formalise a property settlement.
Consent orders are made by the court. The court checks that the orders are just and equitable.
A binding financial agreement is not checked by the court for fairness when it is made. That is why the advice and disclosure steps matter so much.
Which option suits you depends on your circumstances. Get advice before you decide.
Where people get caught
Signing without full disclosure
Hiding or leaving out an asset can lead to the agreement being set aside for fraud.
Signing under pressure.
Unconscionable conduct when the agreement is made is a ground to set it aside.
Sharing one lawyer.
Each party needs their own independent legal advice and a signed statement.
Ignoring a change in the children's circumstances.
A material change about a child that causes hardship can open the agreement to challenge.
Losing the documents.
Keep the signed agreement and the lawyers' statements safe. You may need to prove the steps were followed.
If you or anyone in your family is at risk of harm, call 000.
Common questions
Q: Does the court need to approve a binding financial agreement?
A: No. It binds the parties if it meets the rules in the Act.
Q: Can we make an agreement before we marry or move in together?
A: Yes. An agreement can be made before, during or after a marriage or de facto relationship.
Q: Can we change or end the agreement later?
A: The Act provides for a termination agreement, and a court can also set aside a termination agreement on the same grounds. Get advice before you change or end an agreement.
Get independent advice before you sign. Call (02) 8062 6300.
This article is general information only. It is not legal advice for your situation.