A binding financial agreement (BFA) is intended to provide certainty. Couples enter into them precisely because they want a clear, enforceable record of how their finances and property will be handled. But circumstances change, and the law recognises that there are situations where holding someone strictly to the terms of a BFA would be unjust. If you are wondering whether a BFA you signed can be challenged, or whether one already in place can be varied, the answer depends on the specific grounds available under the Family Law Act 1975 (Cth).
When a court can set aside a BFA
Section 90K of the Family Law Act sets out the grounds on which a court may set aside a binding financial agreement. These grounds are deliberately narrow. The courts do not set aside agreements simply because one party later regrets signing, or because the outcome turned out to be less favourable than expected. The circumstances that can justify setting aside a BFA include:
- Fraud: where a party failed to disclose a material matter, or where the agreement was obtained through fraud.
- Unconscionable conduct: where one party engaged in conduct that was so unfair or oppressive that it would be unconscionable to allow the agreement to stand.
- Duress, undue influence, or unconscionability at the time of signing: if a party was pressured into signing or was in a substantially weaker bargaining position that was exploited.
- Impracticability: where, due to a change in circumstances, it is impracticable to carry out the agreement or any part of it.
- Material change in circumstances relating to children: where, since the agreement was made, a material change in circumstances has occurred concerning the care, welfare, or development of a child of the relationship, and the child or the carer would suffer hardship if the agreement were not set aside.
- Void, voidable, or unenforceable contracts: where a contract that underpins the BFA would be void, voidable, or unenforceable under general law principles.
- Conduct to defraud creditors: where the agreement was made to defraud a third party, such as a creditor of either party.
If any of these grounds are established, a court has the discretion to set the agreement aside. It is worth noting that "discretion" means the court is not obliged to set it aside even if a ground is proven; it will weigh the overall justice of doing so.
The importance of independent legal advice
One of the most common reasons a BFA becomes vulnerable to challenge is a failure to obtain independent legal advice. Under the Family Law Act, each party must receive independent legal advice before signing the agreement. That advice must cover the effect of the agreement on their rights, and whether or not it is in their best interests. A certificate signed by each party's lawyer confirming this advice must accompany the agreement.
If one party did not receive proper independent legal advice, or if the advice was inadequate, the agreement may be set aside on that basis alone. Courts have found agreements unenforceable where solicitors effectively acted for both parties, where advice was given hurriedly just before signing, or where a party did not meaningfully understand what they were agreeing to. This is one reason why careful legal guidance from the outset matters so much. You can read more about the formal requirements and safeguards in our overview of binding financial agreements: what they are and how they work.
Can the parties agree to change or terminate a BFA?
Yes. The parties to a BFA can agree between themselves to terminate it or to replace it with a new agreement. This is often the most straightforward option when both parties accept that the original agreement no longer reflects their intentions or circumstances. The termination or variation must itself meet the formal requirements of a binding financial agreement under the Family Law Act, including the requirement that both parties obtain independent legal advice on the new or terminating agreement.
Simply agreeing verbally, or even in a written email exchange, is not sufficient. The formalities must be followed precisely, or the termination itself may be unenforceable.
Practical considerations before challenging a BFA
Challenging a BFA is not a simple task. Court proceedings are costly, time-consuming, and stressful. Before taking that step, it is worth carefully assessing whether the grounds for challenge are genuinely present and whether the likely outcome justifies the process. Some questions worth asking include:
- Was there full and frank disclosure of assets and liabilities by both parties at the time the agreement was made?
- Was the agreement signed well in advance of any marriage or relationship formalisation, or was it rushed through at the last minute?
- Has there been a significant change in financial circumstances since the agreement was signed, such as the birth of children, a serious illness, or a major shift in one party's financial position?
- Did both parties have genuine access to independent legal advice, and was there adequate time to consider that advice?
If a BFA is ultimately set aside, the court will then deal with the property and financial matters as if no agreement existed. This means the court applies the same framework it would in any property settlement dispute. Understanding how that framework operates is important context, and our article on how property settlement works after separation in Australia is a useful starting point.
What happens after a BFA is set aside?
Once a court sets aside a BFA, the slate is not entirely clean. The court still has to resolve the property and financial issues between the parties. It will consider the contributions each party has made (financial and non-financial), future needs, and the overall justice and equity of any proposed division. In some cases, particularly where the BFA was designed to protect significant pre-relationship assets, the outcome without the agreement may look very different from what was originally intended.
For anyone navigating separation or considering the implications of a BFA that is already in place, getting current legal advice is critical. The interaction between a BFA, property settlement, and any ongoing financial obligations is complex, and the stakes are high. Whether you are thinking about entering an agreement, questioning one you have already signed, or working through the broader process of financially separating from a spouse, experienced family law advice makes a meaningful difference to the outcome.