A binding financial agreement (BFA) is one of the most powerful tools available under Australian family law. It allows couples to set out how their assets and financial resources will be divided if a relationship ends, without needing to go through the court system. But a BFA is only enforceable if it satisfies specific legal requirements. Get those requirements wrong, and the agreement can be set aside entirely, leaving both parties without the protection they thought they had.
What the law actually requires
Under the Family Law Act 1975 (Cth), a binding financial agreement must meet several formal requirements before it will be recognised as enforceable. These are not optional steps or mere formalities. They are threshold conditions, and failing any one of them can be fatal to the agreement.
- The agreement must be in writing. Verbal arrangements have no legal standing under the Act.
- Both parties must sign the agreement. A BFA that has only been signed by one party is not binding.
- Each party must receive independent legal advice. Before signing, each person must obtain advice from a separate, qualified family lawyer about the effect of the agreement on their rights and about the advantages and disadvantages of making the agreement at that time.
- A certificate of independent legal advice must be attached. Each lawyer must provide a signed statement confirming that advice was given, and a copy of that statement must be included with the agreement.
- No party should have had the agreement terminated. If a prior BFA was terminated or set aside, care must be taken to ensure that situation is addressed correctly before a new one takes effect.
The central role of independent legal advice
The requirement for independent legal advice is the most commonly misunderstood element of a BFA. It is not enough for both parties to simply see the same lawyer, or for one lawyer to briefly explain the document to both people. Each party must receive advice from their own solicitor, acting in their interests alone. The advice must cover both the legal effect of the agreement on that person's rights and whether making the agreement at that time is in their best interests. For more on what this role involves in practice, see our guide on what a prenup agreement attorney does and why their involvement is so critical.
Courts have consistently held that where independent legal advice was defective, rushed, or not genuinely given, the agreement cannot stand. This includes situations where a party signed under pressure, did not understand what they were agreeing to, or where the lawyer acting for them had a conflict of interest.
When a BFA can be set aside
Even a formally compliant BFA is not necessarily permanent. The Family Law Act gives courts the power to set aside a binding financial agreement in certain circumstances. Understanding these circumstances is just as important as understanding how to make one correctly. The main grounds include:
- Fraud, including failing to disclose a material matter (such as concealing significant assets or liabilities).
- Unconscionable conduct, where one party took advantage of the other's vulnerability, lack of understanding, or undue influence.
- A material change in circumstances relating to the care, welfare, or development of a child of the relationship, where it would be impracticable to enforce the agreement.
- Duress or undue influence at the time the agreement was signed.
- Voidable circumstances under general contract law, such as misrepresentation.
For a more detailed look at these grounds, our article on whether you can change or set aside a binding financial agreement covers each scenario in depth.
Full and frank financial disclosure
One factor that courts look at closely is whether both parties made full and frank financial disclosure before signing. While the Act does not prescribe a formal disclosure process in the same way as court-based property settlement proceedings, concealing assets or misrepresenting your financial position is a recognised basis for having an agreement set aside on the grounds of fraud or misrepresentation.
This means both parties should exchange complete information about their assets, liabilities, superannuation, income, and any other relevant financial interests before the agreement is finalised. A lawyer will typically assist in ensuring this exchange happens properly and is documented.
Timing and circumstances of signing
Australian courts have paid close attention to the circumstances in which a BFA was signed. An agreement presented to one party on the eve of a wedding, with no real opportunity to seek advice or consider the terms carefully, is vulnerable to challenge. The courts look at whether there was adequate time for each person to obtain and absorb legal advice, whether pressure was applied, and whether the terms were fair and reasonable at the time.
This does not mean a BFA must be negotiated months in advance, but both parties should have a genuine opportunity to engage with the process. Last-minute arrangements carry real risk.
De facto couples and BFAs
It is worth noting that binding financial agreements are not limited to married couples. De facto partners can also enter into a BFA under the Family Law Act, provided they meet the relevant criteria. The same formal requirements apply, including the independent legal advice requirement. If you are in or entering a de facto relationship and are considering a BFA, the financial entitlements available on separation are an important part of the picture. Our article on de facto break up entitlements in Australia provides useful background on what those rights look like without an agreement in place.
Getting it right from the start
A binding financial agreement that was poorly drafted, executed without proper legal advice, or signed under questionable circumstances is not just unenforceable. It can create costly and stressful litigation at the worst possible time. The best way to ensure your BFA holds up is to work with experienced family lawyers who understand the requirements in detail and can guide both parties through the process correctly from the outset.
If you have questions about whether your existing agreement is enforceable, or you are considering entering into a new one, contact Rockwell Family Law Services to speak with a member of our team.