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      Binding Financial Agreements and How to Set them Aside


      Binding Financial Agreements and How to Set them Aside

      Binding Financial Agreements and How to Set them Aside 1024 684 Dorter

      Have you entered into a Binding Financial Agreement (BFA) that is outdated or is unfair?

      In certain circumstances, the laws in Australia may enable a party to receive a just and equitable property settlement, if permitted by the Court.

      Recent Decision

      In October 2019, in the decision of Westacott & Dunwoody (No. 2) [2019] FAMCA 719, Dorter Family Lawyers and Mediators successfully set aside a BFA on the grounds that it would have been unjust and inequitable to not uphold the Termination Agreement the parties had entered into on separation. Dorter Family Lawyers represented the Husband who is now able to seek a property division that will be just and equitable under the Family Law.

      The Husband sought to set aside a BFA entered into by both the Husband and the Wife in 2005. In 2018, the parties entered into a Termination Agreement which enabled the parties to enter into Consent Orders for a final property settlement with terms different to their original BFA.

      The Wife later sought for the Termination Agreement to be set aside, and to uphold the BFA on the grounds that the Husband did not obtain the required independent legal advice when entering into the Termination Agreement.

      The Court found that since the making of the BFA, the Wife had made various payments to the Husband which were consistent with the Termination Agreement and inconsistent with the BFA. Accordingly, the Court found that it would be unjust and inequitable for the Termination Agreement to not be upheld and therefore, declared the Termination Agreement binding, which effectively terminated the BFA.

      What is a BFA?

      A BFA, or commonly known as a ‘Prenup,’ is an agreement entered into by two parties to a relationship which sets out how, in the event of a relationship breakdown, the parties’ financial affairs and property will be dealt with. You can enter into a BFA prior to being married or engaged, during a de facto relationship or marriage, or after a divorce.

      Provided that all the legal requirements are satisfied when entering into the BFA, you and your partner will be bound by the terms of the agreement. As a result, you do not need to approach the Court for a final determination of your property settlement in the event your relationship breaks down.

      Is your BFA Binding?

      Before you consider setting aside your BFA, the Court will consider whether your BFA is binding.

      Under the Family Law Act 1975 (Cth) (“the Act”), a financial agreement is only binding if you and your partner each satisfy the following:

      1. The agreement is signed by each party;
      2. Before signing the agreement, independent legal advice is obtained by each party in relation to the effect of the agreement and the advantages and disadvantages of the agreement;
      3. Each party obtains a statement signed by their legal practitioner stating that this advice was provided; and
      4. Neither party has terminated the agreement and the agreement has not been set aside by the Court.

      If one or more of the above has not been satisfied, you may not be bound by your BFA. You may then be entitled to seek a property settlement that would be considered just and equitable under the Family Law.

      Terminating the BFA

      If both you and your partner no longer wish to be bound by your BFA, you may terminate the agreement by entering into a further BFA terminating the first agreement, or by entering into a ‘Termination Agreement’. These are the only two options available to terminate the agreement in accordance with the Act and you should obtain legal advice about how to do this.

      Before signing a Termination Agreement, each party must obtain independent legal advice to understand their rights and to understand the advantages and disadvantages of making the Termination Agreement.

      Setting aside the BFA

      If the parties have not terminated their BFA and a party wishes to set aside the BFA, the Court must be satisfied of one of the following grounds:

      1. The agreement was obtained by fraud;
      2. The purpose of the agreement was to defraud or defeat a creditor or the other party;
      3. The agreement was made with reckless disregard to creditors or the other party;
      4. The purpose of the agreement was to defeat an interest of the other party;
      5. The agreement is void, voidable or unenforceable;
      6. Circumstances have arisen to make the agreement impracticable to be carried out;
      7. Since the making of the agreement, there has been material changes which involve the care, welfare and development of a child and the party who is responsible for the child will suffer hardship if the BFA is not set aside; or
      8. A party engaged in unconscionable conduct when making the agreement.

      Application of Rules of Contract

      A BFA, being a contract, is subject to the laws of contract and legal advice should be obtained to ensure your BFA also complies with the laws of contracts.

      Simplifying the laws of contract, the BFA may be voidable or unenforceable if:

      1. One party repudiates the contract by showing that they no longer wish to be bound by the contract and the other party chooses to rescind the contract; or
      2. One party intentionally waives their right to enforce the contract or abandons the contract by acting in a way that is totally inconsistent with the contract.


      1. Do I have to go to Court to set the BFA aside?

      Unfortunately, to set a BFA aside, you will need an order of the Court if the other party does not agree to mediate and reach agreement. If both parties agree to not be bound by a BFA, a Termination Agreement should be completed in accordance with the Family Law Act.

      2. What if the BFA does not deal with all of the property in the event of separation or divorce?

      Part or all of the BFA may become uncertain and therefore unenforceable. This will depend on the terms of the clause considered in the context of the BFA entirely.

      3. Can the BFA include a parenting agreement?

      These clauses will not be binding and cannot be enforced. The best way to deal with parenting is through Consent Parenting Orders.

      4. Can the BFA include a parenting agreement? 

      The Court will still have jurisdiction to deal with spouse maintenance in accordance with the Family Law.

      Each party’s circumstances are unique and legal advice should be obtained from a family lawyer who specialises in such agreements if you seek to rely upon or set aside a BFA.

      If you require assistance, please contact Dorter Family Lawyers and Mediators on (02) 9929 8840 or via email on hello@inst1045122-8984.ozhosting.com.