As Perth's experienced business contract lawyers, Havilah Legal outline are binding financial agreements really legally binding.

1. Are Binding Financial Agreements
Really Legally Binding?
Presented by Perth’s experienced Business Contract Lawyers

2. Binding Financial Agreements (BFA’s)
While Binding Financial Agreements (BFA’s) are a popular way of providing
certainty in the financial outcomes for people married or in de-facto
relationships, they are notoriously technical and highly litigated.
So this article examines whether you can be confident whether a BFA is
applicable to your situation.
It took around 25 years following the establishment of the Family Law, for
Australian law to introduce the option of Financial Agreements between parties
in relationships and they have been litigated in terms of enforceability ever since.

3. Binding Financial Agreements (BFA’s)
In early court decisions, it was the technical aspects of these agreements were
used to avoid them.
Many lawyers would and still do refuse to draft them on the basis that there were
too many technical requirements and it was just too dangerous.
The grounds of attack used to set aside these agreements are numerous, but first
it’s helpful to list the 3 different types of a Financial Agreement contemplated in
the Family Law legislation, which are agreements where the parties are:
1. Contemplating entering into a marriage; (the so called pre-nup) s.90B
2. Already married make an agreement during the marriage; s 90C and
3. Already divorced and an order has been made.(s90D)

4. Binding Financial Agreements (BFA’s)
Section 90G(1) of the Family Law Act outlines the legal requirements for a
Financial Agreement to be binding.
90G When financial agreements are binding
(1) Subject to subsection (1A), a financial agreement is binding on the parties to the
agreement if, and only if:
(a) the agreement is signed by all parties; and
(b) before signing the agreement, each spouse party was provided with independent
legal advice from a legal practitioner about the effect of the agreement on the rights
of that party and about the advantages and disadvantages, at the time that the
advice was provided, to that party of making the agreement; and
(c) either before or after signing the agreement, each spouse party was provided with a
signed statement by the legal practitioner stating that the advice referred to in
Paragraph (b) was provided to that party (whether or not the statement is annexed
to the agreement); and
(ca) a copy of the statement referred to in paragraph (c) that was provided to a spouse
party is given to the other spouse party or to a legal practitioner for the other
spouse party; and
(d) the agreement has not been terminated and has not been set aside by a court.
Note: For the manner in which the contents of a financial agreement may be proved, see section 48 of the Evidence Act 1995.

5. Binding Financial Agreements (BFA’s)
In general, the grounds which are commonly used to attack a binding financial
agreement are really tied up with more general principles of contract and of
equity.
There are certain technical requirements that are set out in the Family Law Act
which need to be satisfied but instead let’s discuss some of the contractual and
equity issues and the recent cases that have identified principals in which a BFA
can be set aside; - notwithstanding that it satisfies the technical legal
requirements in the Family Law Act.3.

6. Does a Binding
Financial
Agreement need to
be fair?
You would think that there may be an overriding
obligation of fairness or reasonableness for
parties entering into a BFA.
In fact the test in the Family Law Act 1975 at
s90(G)(1A)(c) was interpreted in several cases.
These explored whether the use of the words,
‘unjust and inequitable’ were applicable to the
general terms of the BFA or had a more limited
meaning.

7. Does a Binding Financial Agreement need to be Fair? (Continued)
For it to be binding, according to the Family Law Act 1975, the court only needs;
S 90 G (1A(c) -
… to be satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse
parties to the agreement disregarding any changes in circumstances from the time the agreement was
made;
The authorities seem to suggest that the parties can literally strike the worst bargain and still be bound by that
bargain.

8. Does the Information
Detailed in the
Financial Agreement
Regarding the Values
of Assets & Liabilities
need to be Completely
Accurate?
As it is common for parties to attach a schedule
to a BFA identifying the value of the assets or
liabilities, one ground open to challenge is that
the statement of the value is misleading.
The complete omission of an asset which is
deliberate is different to expressing an opinion
about the estimated value of an asset.

9. (Continued)
If the parties intended to estimate values based on underlying assumptions that were reasonable, then the
expression of those assumptions in the agreement will provide a measure of protection in a claim to set the
agreement aside.
Ultimately it is the intention of the parties about how they reflect their assets and liabilities at the time.

10. Is the Agreement
Impractical to
Carry Out?
In general terms, a court won’t intervene on this
basis simply because there may have been a
reduction or an increase in the value of some
asset or assets.
Nevertheless there are circumstances where the
court has found that the agreement is
impractical to be carried out; - particularly where
one party diverted the other party’s only asset
away from him without his knowledge.

11. Does the Lead up to
the Signing of the
Binding Financial
Agreement Establish
Undue Influence or
Alternately Establish
Duress?
In general terms the test for undue influence or
duress must be established in the lead up to the
negotiations for entering into the agreement.
Duress avoids contract where fear was induced,
such as to deprive a party of their free will.
The duress must have been the sole or at least
the principal cause for signing the BFA.

12. Conclusion
Whilst a BFA is often desirable the opportunity
to dispute this document depends on many
possible circumstances.
Options for certainty may exist outside of a BFA
and should be considered before electing a BFA
in your particular circumstances.