Can Binding Financial Agreement be overturned?

Yes, a Binding Financial Agreement, also referred to as a “BFA”, can be overturned by a Court.

What is a Binding Financial Agreement?

A Binding Financial Agreement is an agreement that can be drafted pursuant to the Family Law Act 1975 which is a private contract outlining an agreement reached between two parties of a relationship as to how their property is to be divided after separation. The Binding Financial Agreement can be entered before commencing to live together (still often referred to as a pre nupt by many), during the relationship or after the relationship has concluded. Prior to entering the Binding Financial Agreement, legal advice must be provided to each party, independent of each other, as to the advantages and disadvantages of entering the agreement.

So why if lawyers provide advice about the agreement, could a Binding Financial Agreement be set aside?

Firstly, only the Family and Federal Court of Australia can determine whether a Binding Financial Agreement is binding or not. This would involve one party to the agreement bringing an application to the Court seeking to have the agreement set aside and if that application is successful, revisiting the division of property between the parties.

There are several reasons why a party could bring such an application. The common reasons, as outlined in the Family Law Act 1975, are-

  1. Fraud (including non-disclosure of a material matter such as a hidden bank account or a property or company asset not disclosed prior to entering the agreement),
  2. The intention is to defraud a creditor of one of the parties by entering into the Binding Financial Agreement.
  3. A party to the Binding Financial Agreement was coerced or forced to sign it under duress. An example of this would be the agreement being presented to the other party a week before a marriage and told to sign it or the wedding is off.
  4. A change in circumstances that would now make carrying out the Binding Financial Agreement impracticable, unjust or inequitable. Such an example would be the failure of the agreement to consider the birth of children and the couple then has three children, they separate, and one party expects that the property should be divided as was agreed prior to having children
Couple signing a Binding Financial Agreement

In creating a Binding Financial Agreement, the agreement in its construction and its execution must comply with the requirement of the Family Law Act 1975. Those requirements are that

  1. The agreement outlined in the document for the division of property must be just and equitable considering all of the facts of the relationship and taking into consideration future things that may also occur such as children in the example used above.
  2. The document must be signed by both parties.
  3. Both parties must have been provided with independent legal advice from a legal practitioner about the effect of the agreement on their rights and about the advantages and disadvantages of that party entering into the Binding Financial Agreement.
  4. That the parties to the agreement are provided with a written statement, usually referred to as a Legal Advice Certificate, stating they have provided the advice referred to in point 2 above and that can be done either before or after the agreement is entered.
  5. The Legal advice certificates are provided to the other party.

If one or more of the above are not done and the Court finds that the Binding Financial Agreement is not just and equitable, and the agreement has not otherwise been terminated, then the Binding Financial Agreement will be set aside by the Court.

Can a Binding Financial Agreement be amended or terminated?

A Binding Financial Agreement can be amended and also terminated. However, an amendment is not like you both simply agreeing verbally to amend the Binding Financial Agreement and then getting on with life. Any amendment would require a new Binding Financial Agreement to be drafted and re-entered which would contain the variation agreed upon and would contain a clause that terminated the old Binding Financial Agreement.

A Binding Financial Agreement can also be terminated by the parties entering into a Termination Agreement.  An order of the Court can also terminate a Binding Financial Agreement as can parties entering into a new Binding Financial Agreement with a termination clause for the old Binding Financial Agreement.

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Should you have any questions about Binding Financial Agreements being overturned, you should contact MCG Legal on 55912222.

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