Binding financial agreements (BFAs) are often seen as a tool to provide financial security and clarity in relationships, particularly during separations.
However, questions frequently arise about their reliability—can they truly offer the protection they promise, or are they susceptible to being overturned?
This article delves into the conditions under which a BFA might be challenged in Australia and examines whether they are as secure as they appear.
Grounds for Overturning a Binding Financial Agreement
Binding financial agreements are intended to be legally enforceable contracts, but they are not immune to being overturned under certain circumstances. Australian family law outlines specific grounds where a court may set aside a BFA, including:
1. Fraud or Misrepresentation
A BFA may be overturned if one party has been dishonest or withheld critical information during the agreement’s creation. For example, if a party conceals assets or income, the court may consider the agreement invalid due to fraud or misrepresentation.
2. Duress or Undue Influence
If one party was coerced, pressured, or manipulated into signing the agreement, the court may deem it invalid. Duress or undue influence undermines the voluntary nature of entering into a contract, which is a fundamental requirement for enforceability.
3. Unconscionable Conduct
Unconscionable conduct refers to a situation where one party explits the other’s vulnerability, such as financial dependency, language barriers, or lack of legal understanding. If the court finds the agreement grossly unfair or exploitative, it may set it aside.
4. Failure to Meet Legal Requirements
For a BFA to be binding, both parties must receive independent legal advice before signing. The agreement must also comply with all procedural requirements outlined in the Family Law Act 1975. If these requirements are not met, the court may invalidate the agreement.
5. Material Change in Circumstances
Significant changes in circumstances, particularly those affecting the welfare of a child, may lead the court to overturn a BFA. For instance, if the agreement no longer serves the best interests of a child, it may be set aside.
6. Void, Voidable, or Unenforceable Agreements
The court may also overturn an agreement if it is found to be void, voidable, or otherwise unenforceable. This could occur due to errors in drafting, lack of clarity, or conflicting terms within the agreement.
Process for Overturning a Binding Financial Agreement
Overturning a binding financial agreement involves a legal process that requires court intervention. Below is a step-by-step guide to how this process typically unfolds:
1. Seek Legal Advice
Before taking action, it is crucial to consult a lawyer who specialises in binding financial agreements. They can assess the agreement and determine whether there are valid grounds to challenge it.
2. File an Application with the Court
To initiate the process, the aggrieved party must file an application with the Family Court of Australia or the Federal Circuit and Family Court of Australia. The application should outline the reasons for seeking to overturn the agreement and provide supporting evidence.
3. Present Evidence
The court will require evidence to substantiate the claims made in the application. This may include financial records, communications between the parties, and witness testimonies. Evidence of undue influence, fraud, or other grounds must be compelling and well-documented.
4. Court Hearing
During the hearing, both parties will present their arguments. The court will examine the evidence, assess the validity of the claims, and consider whether the agreement should be set aside. Factors such as fairness, compliance with legal requirements, and changes in circumstances will play a crucial role in the decision-making process.
5. Court Decision
After evaluating all aspects, the court will either uphold the agreement or declare it invalid. If the agreement is overturned, the parties may need to renegotiate terms or proceed with property settlement and financial arrangements through standard legal channels.
Additional Considerations
The Importance of Legal Advice When Drafting a BFA
Ensuring that a binding financial agreement is properly drafted and complies with legal requirements is critical to minimising the risk of it being overturned. Engaging experienced family lawyers who can guide you through the process is essential.
Alternatives to Overturning a BFA
In some cases, parties may choose to renegotiate the terms of a BFA rather than pursuing court intervention. Mediation or collaborative law processes can provide an amicable solution without the need for litigation.
Costs and Implications of Challenging a BFA
Challenging a binding financial agreement can be costly and time-consuming. Legal fees, court costs, and the emotional toll of litigation should be carefully considered before proceeding. Moreover, an unsuccessful challenge may result in additional financial penalties or legal consequences.
Need Help With Binding Financial Agreements?
At my law firm, we specialise in drafting legally valid binding financial agreements in Australia at fixed fee rates. We will ensure that your BFA meets all the legal criteria to minimise the possibility that it can be overturned. Contact our team today by calling 1300 529 888.