Are binding financial agreements enforceable?

Are binding financial agreements enforceable?

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Aussie Legal Forums › Forums › Family Law Forum › Are binding financial agreements enforceable?

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  • Beverly Reyes
    Beverly Reyes April 16, 2025 at 1:12 am

    I have been looking into BFAs as I have moved in with my girlfriend. I get different feedback when i ask the question as to if BFAs are enforceable in the courts. Any help?

    MV
    MV April 29, 2025 at 1:27 am

    Hi Beverley.

    The short answer is yes, binding financial agreements (“BFAs”) are enforceable in the Courts. There are certain legal pre-requisites which must be met for the Financial agreements to be binding and enforceable.
    Firstly, for a BFA to be binding, each party must have firstly received independent legal advice from that party’s own lawyer as to the advantages and disadvantages of that party to enter in to the Agreement and whether it was in that party’s best interest to do so and to ensure that the party receiving that advice understands the implications of the proposed agreement and that the term of the agreement are fair and equitable to both parties. If the lawyers are satisfied, they will sign a 1 page certificate confirming the above.
    The Family Law Act 1975 that governs financial agreements of this kind ensures that the Courts will recognise and support financial agreements.
    This does not mean that a BFA cannot be challenged or that the BFA is upheld in full or part. The Court has the final determination, if challenged, to uphold or strike down the Agreement but the Court must have regard to the Agreement and look at the factors (that the Court takes in to account under s75(2) of the Family Law Act) and considerations and personal circumstances of the parties and factual circumstances/considerations/contributions at the time the Agreement was formed and at the time the Agreement is challenged. Say you sign a BFA and 10 years later you split from your partner, either party may challenge the BFA if they can successfully argue that the terms of the BFA are not fair or if a party was induced, threatened or under duress to sign the Agreement or if a full and frank disclosure of the true financial position of the parties was not made or a party sought to mislead the other party. The onus is on the challenging party to argue why the Agreement should be set aside. It is also an expensive process as the challenging party must retain an experienced lawyer to review the circumstances and advise as to whether the challenge will have a reasonable prospect of being successful.
    It is much better to have a BFA signed and in place than not to have a BFA. This is because it evidences (a) an intention and an understanding and agreement at a particular point in time in the relationship and an agreement as to how property and financial resources are to be divided in the event of break up; (b) it is intended to promote harmony and avoid the cost of expensive and protracted litigation and provides a mechanism to the division of such property; and (c) it shows the assets and liabilities and contributions and what each party had and their respective values at a particular point of the relationship.
    Not having a BFA exposes the party who has made greater contribution or brought more in to the relationship or who has more to lose to a potential claim in the future in the event of breakdown of the relationship.

    I hope this is helpful.
    AussieLegal

    AussieLegal Moderator

    Beverly Reyes
    Beverly Reyes May 2, 2025 at 5:12 am

    Hi MV,

    Thanks for the response. What are the types of reasons that cause BFAs to be challenged and are they successful challenges?

    Beverley.

    MV
    MV May 2, 2025 at 5:23 am

    Hi Beverley.

    In my experience from speaking to family law practitioners over the years, the most common challenges are:
    1. Signing a BFA too close to the date of a wedding or date moving in together. The typical claim is that the effected person may have been pressured into signing the BFA. For example, the stronger financial party may hint that the wedding is not going ahead unless the BFA is signed. The certifying lawyers now will not sign a certificate if they believe there is a possibility of this happening. They will typically advise to sign the BFA after the date of the wedding or after the date of moving in together.
    2. Children of the relationship. If parties sign a BFA and they subsequently have a child or children, and the enforceability of the BFA may be unfair on the welfare of the children or unfair on the custodial parent of the children, then the Court may vary the terms of the BFA to make it more equitable. I have no personal experience of this type of claim, so I am unsure as to what specific arguments are made.
    3. Future needs. If the fundamental circumstances of a party changes during the relationship (say due to a chronic serious health condition) then the terms of the BFA can be varied by the Court to allow for the future needs of the effected party.
    4. One party claiming they did not understand the implication of the BFA. This is harder to argue as the role of the advising lawyers is to be SURE that the party they are advising understands the implications.
    I have no statistics to share about the success or otherwise of challenges. If anyone does have further info, please let the forum know.

    Kind regards,

    AussieLegal Moderator

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