Requisites for valid Binding Financial Agreements
To create a Binding Financial Agreement you must comply with the following requirements:
- Like ordinary contracts, the agreement must be in writing and signed by both parties;
- Each party must obtained independent legal advice (from different legal practitioners) prior to signing the agreement. It is required that the parties must be informed of the effects of the agreement on their rights, as well as the advantages and disadvantages of the agreement;
- The legal practitioner must provide a signed statement certifying that advice was given to the party; and
- A copy of this independent certification must be given to the other party’s legal advisor.
In separation agreements, the terms must likewise provide how the properties should be settled and divided in the event the relationship breaks down.
Termination of a Prenuptial or Postnuptial Agreement
Binding financial agreements are powerful documents. The Family Law Act expressly adheres to the doctrines of law and equity, which generally applies to contracts including financial agreements (Sections 90KA and 90UN). The agreement is intended to be binding on both parties and provide a solid and indisputable framework for the separation of assets.
However, a Prenuptial or Postnuptial Agreements may be set aside for reasonable grounds, such as:
- When the couple failed to comply with the Family Law Act.
- In case of fraud, undue influence or non-disclosure at the time the agreement was made. Contracts are consensual in nature and consent must not be vitiated to have a binding agreement.
- If there were a material change in the welfare of the children and it would cause a hardship to enforce the strict terms of a Prenuptial Agreement. Material changes should relate to the care, welfare or development of a child of the marriage.
- The agreement was obtained by fraud, duress, mistake, undue influence or is unconscionable. The court may set aside any agreement that has been entered into fraudulently, either for a fraudulent purpose or through the failure of a party to disclose a ‘material matter’.
Binding Financial Agreements are very serious documents; the seriousness of the document is best outlined by the requirement for both parties to seek legal advice prior to signing. It is uncommon for the law to force individuals to seek advice prior to signing a document and it echoes just how life changing and important such an agreement can be.
If you are considering any sort of binding financial agreement, or are currently the subject of one, you should seek independent legal advice to fully inform you of the law, and your options.