A Binding Financial Agreement can give couples greater control over how property, financial resources and maintenance will be dealt with if their relationship ends. It may protect a business, preserve family wealth, clarify responsibility for liabilities or establish how particular assets will be retained or divided.
However, the word “binding” does not mean that every agreement will automatically be enforced exactly as written. When separation occurs, one party may question whether the agreement satisfies the required legal formalities, whether important financial information was withheld or whether the circumstances surrounding its preparation make it vulnerable to challenge.
Disputes about Binding Financial Agreements are often technically demanding. The court may need to examine the agreement itself, the advice received by each party, financial disclosure, communications between the parties and the pressure under which the document was negotiated and signed.
A Challenge Is Different From Simply Regretting the Agreement
A person cannot ordinarily escape a Binding Financial Agreement merely because the outcome now appears unfavourable. Agreements are intended to create certainty, and financial circumstances will often change between signing and separation.
A successful challenge generally requires an identified legal basis. For married couples, the principal Commonwealth provisions concerning when an agreement may be set aside are contained in section 90K of the Family Law Act 1975. The equivalent Commonwealth provisions for eligible de facto financial agreements appear in section 90UM. Western Australian de facto agreements are dealt with separately under the Family Court Act 1997.
The existence of a disappointing result is therefore not enough on its own. The person challenging the agreement must usually identify a problem with its formation, operation, enforceability or surrounding circumstances.
The Agreement Must First Be Legally Binding
Before deciding whether an agreement should be set aside, it may be necessary to determine whether it became binding in the first place.
For agreements concerning a marriage, the Family Law Act generally requires the agreement to be signed and each spouse to receive independent legal advice before signing. That advice must address the effect of the agreement on the person’s rights and the advantages and disadvantages of entering into it at that time. The legislation also contains provisions that may allow a court to declare an agreement binding despite certain technical defects where refusing to do so would be unjust and inequitable.
A dispute may therefore involve several different questions:
- Was the agreement signed correctly?
- Did each party receive genuinely independent legal advice?
- Was the advice provided before execution?
- Does the agreement identify the correct legislative provision?
- Was the agreement later terminated or replaced?
- Are its terms sufficiently certain to be enforced?
An agreement can be disputed as invalid or unenforceable without necessarily relying on the statutory grounds used to set aside an otherwise binding agreement.
Non-Disclosure Can Undermine the Agreement
Financial agreements are negotiated on the basis of the parties’ understanding of their financial circumstances. If significant assets, liabilities or interests were concealed, the affected party may argue that the agreement was obtained through fraud, including non-disclosure of a material matter.
Section 90K expressly identifies fraud, including material non-disclosure, as a possible ground for setting aside a financial agreement concerning a marriage. Similar concepts apply under the relevant de facto provisions.
Material non-disclosure may involve more than an omitted bank account. In complex matters, it could concern:
- An interest in a company or trust
- Cryptocurrency or offshore assets
- Related-party loans
- Retained business earnings
- Valuable intellectual property
- Expected proceeds from an existing transaction
- Liabilities that materially affect net wealth
Not every minor mistake will necessarily justify setting the agreement aside. The importance of the missing information and its effect on the decision to enter the agreement will usually require careful analysis.
Pressure, Influence and Unconscionable Conduct
Challenges frequently focus on the circumstances in which the agreement was signed. One party may claim they were placed under intense pressure, given insufficient time, threatened with the cancellation of a wedding or made to feel that refusing to sign would end the relationship.
Pressure alone does not automatically determine the outcome. Courts may consider the broader circumstances, including the parties’ relative bargaining positions, emotional dependence, timing, access to advice and whether one person exploited a special disadvantage.
The Family Law Act permits a court to set aside a financial agreement where a party engaged in conduct that was, in all the circumstances, unconscionable. General contract-law principles concerning duress, undue influence and unconscionable conduct may also become relevant when validity and enforceability are disputed.
A person may have received formal legal advice yet still argue that the surrounding pressure deprived them of a meaningful choice. Conversely, a difficult or emotionally uncomfortable negotiation does not necessarily make the agreement invalid.
Independent Advice Must Be More Than a Formality
Independent legal advice is one of the central safeguards within the financial-agreement regime. Each party requires their own legal practitioner because one lawyer cannot protect two clients whose financial interests may conflict.
The quality and timing of the advice can become important when an agreement is challenged. A court may examine whether the lawyer had the complete agreement, understood the relevant financial circumstances and adequately explained the practical effect of the terms.
People reviewing an existing agreement may consult experienced Family Lawyers Perth to assess the agreement’s technical compliance, the advice documents, the financial disclosure available at signing and the circumstances in which consent was obtained.
The review should not be limited to whether certificates were attached. A mature assessment considers the complete negotiation history and the evidence available to support or resist the challenge.
Changed Circumstances Do Not Automatically End an Agreement
Relationships may last for many years after a financial agreement is signed. During that period, the parties may have children, leave employment, build a business, receive an inheritance, develop health problems or change how they manage their finances.
A change in circumstances does not automatically make an agreement ineffective. Financial agreements are often intended to manage future uncertainty.
However, the legislation provides a potential ground for setting an agreement aside where circumstances arising after it was made create hardship connected with the care, welfare and development of a child. The statutory test is specific and should not be confused with a general argument that the agreement has become unfair.
The focus may include whether the later circumstances were contemplated and whether enforcing the agreement would cause the required level of hardship.
Impracticability Is a High Threshold
An agreement may also be challenged where it has become impracticable to carry out. This is different from the agreement becoming inconvenient, expensive or commercially unattractive.
For example, an agreement may require the transfer of an asset that no longer exists or impose obligations that cannot realistically be performed because of events occurring after execution. The question is generally whether the agreement can be implemented, not whether one party now dislikes its consequences.
Complex drafting can create additional problems. Agreements involving trusts, corporate entities, future inheritances or staged payments may fail to account for changes in ownership, tax treatment or third-party rights.
Clear drafting and periodic review can reduce these risks, although a review does not itself amend the original agreement.
Creditors and Third Parties May Also Be Relevant
A Binding Financial Agreement cannot necessarily be used to defeat legitimate creditors or other protected interests. The Family Law Act includes grounds concerning agreements entered into to defraud or defeat creditors, or with reckless disregard for creditor interests.
This may become relevant where an agreement transfers valuable assets away from a person facing business liabilities, taxation debts or anticipated claims.
Corporate trustees, business partners, lenders and superannuation trustees may also be affected by the proposed outcome. An agreement between two partners cannot always compel an unrelated third party to act contrary to its own legal rights.
Setting Aside the Agreement May Reopen Property Issues
If an agreement is declared invalid or set aside, the financial dispute does not necessarily end. The parties may then need to negotiate a new settlement or ask the court to determine their property and maintenance claims under the applicable legislation.
The court also has powers to make orders preserving or adjusting the rights of parties and other interested persons after an agreement is set aside.
This creates strategic considerations for both sides. A party challenging the agreement should assess not only the prospects of setting it aside, but also the likely position if ordinary property proceedings follow. The cost, evidence, time limits and possible settlement range all matter.
The party seeking enforcement must similarly consider whether defending prolonged litigation is preferable to negotiating a revised outcome.
Evidence Often Determines the Strength of the Case
Challenges to Binding Financial Agreements are highly dependent on evidence. Relevant material may include:
- Draft agreements and marked-up versions
- Emails and text messages
- Financial statements and valuation records
- File notes from legal advisers
- Certificates and written advice
- Wedding or separation timelines
- Medical or psychological evidence
- Records showing asset ownership and disclosure
Memories may differ significantly years after the agreement was signed. Contemporary documents can therefore become more persuasive than later recollections.
Legal professional privilege may also affect access to communications with previous lawyers. A party relying on the advice they received may need to consider whether privilege is waived and what consequences follow.
Early Assessment Helps Control the Dispute
A challenge should not begin with broad allegations that the agreement was unfair. It should begin with a detailed review of the document, the governing legislation, the financial position and the available evidence.
The central questions are whether the agreement was binding, whether a recognised basis exists to challenge it and what financial process would follow if the challenge succeeded.
Binding Financial Agreement litigation can become expensive because it may involve both a preliminary dispute about the agreement and a later dispute about the property settlement itself. Early strategic advice can help narrow the issues, identify evidentiary gaps and determine whether negotiation is possible before positions become entrenched.
A carefully prepared agreement can provide meaningful certainty. When it is challenged, however, the outcome depends on legal requirements and evidence, not simply on the fact that one party now considers the bargain unfavourable.
This article provides general information only and does not constitute legal advice. The legislation applying to married and de facto couples, particularly in Western Australia, should be considered in light of the individual circumstances.