Binding Financial Agreements
The Family Law Act 1975 acknowledges that people should be free to make their own arrangements regarding the division of property after a relationship breaks down without intervention from the court.
Financial agreements (also referred to as binding financial agreements, pre-nuptial agreements and cohabitation agreements) can be made before or during a marriage or de facto relationship to predetermine how property will be divided if the relationship ends. Alternatively, a financial agreement can be made after partners separate to formalise, by mutual agreement, the division of their assets.
How is a financial agreement made?
Financial agreements contain provisions relating to the division of a couple’s property and resources if or after their relationship ends. Once a verbal agreement is reached, the parties must meet separately with a lawyer for independent legal advice.
Generally, one party’s lawyer will prepare a draft agreement based on the negotiations and send it to the other party’s lawyer for consideration. The parties are respectively advised of their rights under the agreement. After any amendments are made and the agreement is settled, they are signed with an acknowledgement that they are each aware of their rights and obligations under the agreement. The parties’ legal representatives must also sign the agreement.
Is a financial agreement legally enforceable?
A financial agreement operates like a legal contract between the parties – each person has certain rights and must perform his/her obligations under the contract. This may involve the closing of bank accounts, the payment of money by one party to another within a particular time, the sale of a home and distribution of funds according to the agreement, etc. The parties must act reasonably and in good faith to fulfil the terms of the contract.
The strength of a financial agreement is typically not tested unless a person fails to perform his or her obligations under the financial agreement and the other party applies to the court for a determination that it is valid and enforceable. If the court finds that the agreement is effective, then an order may be made for its enforcement.
An application for enforcement of a financial agreement may be opposed by an application to have the agreement set aside. An agreement may be set aside in circumstances such as that:
- the agreement was obtained by fraud or duress
- a party failed to disclose significant assets when making the agreement
- the agreement was made to defeat the interests of the other party or a person with whom one of the parties had pending property matters
- there is a dramatic change in circumstances creating hardship for a party to the agreement or concerning the welfare of a child of the relationship
- generally, the court considers it is ‘just and equitable’ to preserve the rights of a party
If you believe you signed a financial agreement under these conditions, or there have been fraudulent circumstances surrounding the making of the agreement, we can advise on the process and likelihood of having the agreement set aside.
Alternatives to financial agreements
An application for consent orders is an alternative to a financial agreement where a relationship has broken down but it must include full financial disclosure by both parties and the court will only approve the orders if, on the information provided, it is just and equitable to do so. Because of the court’s involvement in considering and consenting to the orders it is probable that they may provide greater finality to the separating couple’s affairs.
We can discuss the appropriate option in your circumstances so you can make an informed decision.
If you need assistance, contact [email protected] or call 02 9550 9588 for expert legal advice.