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Challenging the validity of Financial Agreements in Court

Challenging Validity Of Financial Agreements

Financial Agreements are contracts that let couples arrange how their property will be divided if their relationship breaks down.

You may have heard them referred to generically as ‘Binding Financial Agreements’ or ‘BFA’s’ although those terms can be somewhat inaccurate. Whether a Financial Agreement is ‘binding’ is often the crucial question.

Financial Agreements (which can be entered at any stage of a relationship – including after it has broken down) can be used as an alternative to having your property settlement decided under the Family Law Act. But because you’re effectively contracting out of your legal rights, these documents are governed by strict legal requirements in terms of what they can include, what you and your partner will need to disclose and how they can be drafted.

If a Financial Agreement runs afoul of any of these legal requirements, it could be set aside by the Family Court.

There are three broad situations where a Financial Agreement can be challenged:

  1. It is drafted in a way that does not comply with the Family Law Act;
  2. It contravenes certain aspects of the Family Law Act; or
  3. It contravenes the general law governing the enforceability of contracts.
What needs to go into a Financial Agreement to make it valid?

Section 90G of the Family Law Act sets out what a Financial Agreement must contain to be valid. Generally speaking, it requires:

  • That the Agreement is signed by the parties in the relationship;
  • That before signing the agreement, each party has obtained independent legal advice about the effect of the Agreement on their rights and the advantages and disadvantages of entering into the Agreement;
  • That the parties have been given signed statements which say they’ve been given independent legal advice; and
  • That both parties have given a copy of the signed statement of independent legal advice to the other party or their lawyer.

But it doesn’t end there. Just because a Financial Agreement contains these things, doesn’t automatically mean it is valid. Section 90K of the Family Law Act lists scenarios where a court may set aside a Financial Agreement. They include:

  • Where one party enters the Agreement through fraud or they fail to disclose a material matter to the other party (for example, they fail to adequately disclose their financial position);
  • Where the Agreement is unenforceable, void, or voidable under law;
  • Where there has been a change in circumstances that makes it impracticable to enforce the Agreement;
  • Where there have been material changes in circumstances relating to the care, welfare and development of a child of the relationship (or a child for whom one party has responsibility) which would result in hardship if the Agreement remained in force; or
  • Where one party acted unconscionably when making the Agreement.
General law of contracts

Again – that’s not all. Because Financial Agreements are contracts, they are governed by the general law of contracts as well as the Family Law Act (although there is some degree of overlap between the two). But in general a Court may also set aside a Financial Agreement if:

  • It was entered into as a result of fraud, duress, undue influence, or misrepresentation of fact;
  • It was signed through a legitimate mistake.
What to do if you want to challenge a Financial Agreement

If you’d like to challenge a Financial Agreement, or if someone is challenging a Financial Agreement you’d like to enforce, you should speak to Catherine Henry Lawyers’ family law team.

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