A Binding Financial Agreement (BFA) is an agreement between de facto or married couples (including same-sex), which must comply with the Family Law Act 1975 (Cth). The purpose of such an agreement is to minimise the need for court intervention following the breakdown of a relationship.
Before marriage-this is known as a Pre-Nuptial agreement and is made when the parties are in a de facto relationship or in contemplation of marriage. It may also be wise to provide for any significant changes that might occur during this period, such as the birth of a child or earning capacities.
- during marriage (post Nuptial);
- during marriage in contemplation of separation (separation);
- after separation
What to Include in the Agreement
The broad function of a BFA is to ensure that all assets and liabilities are divided as stated should the relationship breakdown. Generally, you will address areas such as financial resources, maintenance, children and superannuation. You may want to include specific matters such as:
- Assets and liabilities taken into the relationship;
- Assets and liabilities acquired during the relationship;
- Future assets and liabilities;
- How you will divide your money;
- Whether you will combine income;
- How you will divide income if one person becomes a stay at home parent;
- How you will divide your rent or mortgage;
- Spousal Maintenance
When the Agreement would take Effect
A separation declaration is necessary for a BFA to take effect. This would need to state that the parties are living separately and there is no reasonable likelihood of reconciliation.
Ensure the Agreement is Binding
A court will only consider an Agreement to be legal and binding if it is compliant with the Family Law Act 1975 (Cth). Such formalities include the following:
- The agreement must be in writing;
- Both parties must obtain independent legal advice. Your solicitor should advise you of the advantages and disadvantages of the agreement and how it will affect you;
- Your solicitor must provide a signed statement confirming that the above advice was provided;
- You must provide your solicitor’s signed statement to the other party or their legal practitioner;
- Both parties must sign the agreement;
- The agreement must not have been terminated or set aside;
Enforceability of Agreements
Whilst a BFA is not a court order it is still a contract and, as such, must comply with the general principles of contract law. Therefore, a court has the power to declare a contract void, award damages or order a party to fulfil their contractual obligations.
Having the Agreement Set Aside
If you choose to enter into a BFA, you will lose your right to negotiate a settlement in court. However, a court order will often be a more complex, expensive and drawn-out process. With that being said, there may be some circumstances where a court will intervene and the agreement will be set aside such as:
- if it was obtained by fraud (including non-disclosure)
- if the intention was to defraud a creditor or this occurred unintentionally due to reckless behaviour
- if the agreement is void, voidable or unenforceable
- if it is impractical to continue with the agreement
- if the agreement would cause hardship
- where unconscionable conduct has occurred
- if the agreement covers a superannuation interest that you cannot split
Terminating an Agreement
The parties can end (contract out of) an agreement by signing a document that specifically terminates it; or by entering into a new agreement which contains a clause terminating the existing agreement.
Binding Financial Agreements are not the only way to formalise what you and your former partner agree on. Alternatively, you can establish property division and parenting arrangements by way of Consent Orders or Parenting Orders. You can file either of these documents in the Family Court after the relationship has come to an end.