5 Tips You Need to Know When Reviewing Your Binding Financial Agreement

A binding financial agreement, or BFA, is a written contractual agreement that allows couples to determine how their property and financial resources will be divided in the event of a relationship breakdown. It saves the couple from applying to court and can be helpful in reducing the legal costs associated with the breakdown of a relationship.

BFAs can be utilised by couples who are planning to be married, are currently married, or divorced. They are also able to be used by couples who are or were in a de facto relationship.

While BFAs can be a useful tool, it is important to make sure your BFA has been properly drafted to protect yourself and your partner in the event of a relationship breakdown.

Below are five things to look out for when reviewing your BFA.

1. Ensure Compliance with Statutory Requirements

BFAs are governed by the Family Law Act 1975 (Cth) (Act). If your BFA does not comply with the Act, specifically section 90G, you may find that the agreement could be successfully challenged after separation.

Necessary elements to check include:

• Is the BFA drafted under the correct section of the Act? The appropriate section of the Act will vary depending on whether you are married or in a de facto relationship, and whether the BFA is being entered into before, during or after the relationship.
• Has the BFA been signed by all parties?
• Has each party received independent legal advice about the effect of the agreement on their rights, and the advantages and disadvantages of entering into the agreement?
• Is there a signed statement from the legal practitioner for each party confirming that advice has been provided to each party and exchanged between the parties or their legal representatives?
• Did each party make full and frank financial disclosure? In Adame & Adame [2014] FCCA 42, the Court set aside the agreement on the basis of misrepresentation as the husband failed to fully disclose his assets.

2. Check for Independent Legal Advice

Confirm that each party received independent legal advice specific to the final version of the BFA. In cases such as Daily & Daily [2020] FamCA 486 the Court emphasised the importance of legal advice being provided in relation to the final version of the BFA, particularly if amendments were made after initial advice was given. Failure to meet this requirement could render the agreement non-binding.

3. Assess for Potential Grounds to Set Aside the Agreement

Review the BFA for any potential grounds under section 90K of the Act that could lead to it being set aside. These include:

• fraud;
• duress;
• unconscionable conduct; or
• material changes in circumstances, such as the birth of children, that could result in hardship if the agreement remains binding.

In Carran & Carran [2022] FedCFamC2F 818, the Court found that the wife would suffer hardship due to material changes in circumstances relating to the care and welfare of children, even if the agreement was binding. The agreement was set aside.

4. Evaluate the Agreement’s Fairness and Equity

Consider whether the BFA is just and equitable, particularly in light of section 90G(1A). Even if a BFA is missing some of the statutory requirements that would otherwise make it binding, the Court has the discretion to enforce a BFA if it would be unjust and inequitable not to do so.

Equally, it is important to ensure the BFA is just and equitable to ensure it cannot be successfully challenged. Where a BFA has been drafted that is not just and equitable, the Court has the discretion to set the agreement aside or declare it voidable. In Guild and Stasiuk [2020] FamCA 348 the Court set aside the agreement as it would be unjust and inequitable in the circumstances for the agreement to be upheld.

5. Verify the Agreement’s Scope and Clarity

Ensure that the BFA clearly defines the property, financial resources, and any exclusions, such as inheritances or post-separation property. Ambiguities or omissions could lead to disputes or challenges. Secondary materials highlight the importance of precise drafting to avoid future litigation and to ensure the BFA effectively ousts the Court’s jurisdiction over the matters it addresses.

By following these tips, you can ensure that a binding financial agreement is robust, enforceable, and less likely to be challenged in Court.