Are Binding Financial Agreements Enforceable?

Are Binding Financial Agreements Enforceable?

By cropped movement legal

· Read time: 6 minutes

Binding Financial Agreements are enforceable for the most part, assuming that they meet the core criteria of being correctly executed, and both parties obtained independent legal advice.

A Binding Financial Agreement can be a useful tool for maintaining clarity about your property interests in the event that your relationship breaks down. They are a great tool to provide reassurance and security to parties regarding finances and resources.

It is important to make sure that these agreements are drafted properly by a specialist lawyer to ensure that it will be enforceable if it is ever disputed in Court. 

Getting it right means avoiding lengthy and expensive litigation – or that at least in the course of doing so, you’ll have the greatest chance of having the Court decide in favour of maintaining a Binding Financial Agreement (BFA). 

Enforcing a Binding Financial Agreement 

The best way to draft a Binding Financial Agreement is to refer to the Family Law Act, which will determine whether or not a court can find the agreement enforceable. 

There are some formalities required to ensure that the agreement is binding: 

  • The agreement must be signed by both parties;
  • Both parties must obtain independent legal advice. This works to ensure that each party sufficiently understands how the agreement will bind them, and to work out any advantages or disadvantages that arise from the agreement that may need to be negotiated;
  • The lawyers whom the parties obtained the advice from must sign a statement to declare that they have provided this advice to their client. This document must be provided to the other party.

In the event that these formalities have not been strictly adhered to, a court may still be able to make an order that the agreement is binding. This occurs where it is established that it would be unjust and inequitable were it not to be binding. 

When will a Binding Financial Agreement be Unenforceable?

The Family Law Act sets out instances in which a Binding Financial Agreement will not be enforceable. These include: 

  • If the agreement has been entered into through fraudulent means, for instance, if a party makes marriage conditional on signing the agreement;
  • Where parties have failed to provide proper disclosure, for example, by hiding assets;
  • Where the agreement does not adhere to the required formalities, as set out above;
  • If the parties’ circumstances have changed dramatically, making it impractical or impossible to carry out the agreement;
  • If one party’s conduct was unconscionable during the process of drafting the Binding Financial Agreement;
  • Where the agreement is set out in uncertain terms, or contains substantial errors that would render the agreement unenforceable; 
  • Where the agreement was entered into for the purpose of defrauding or defeating a creditor, or with an apparent disregard for a creditor’s interest;
  • Where there is a ‘payment flag’ operating on a superannuation interest that is included in the agreement, and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement. A payment flag means that the trustee of the superannuation fund must notify both parties of any benefits payable. More details regarding this are set out in the Family Law Act; 
  • Where the Binding Financial Agreement covers a superannuation interest that is considered an ‘unsplittable interest’. This is a superannuation interest with a withdrawal benefit of less than $5,000. The terms of this are set out in greater detail in the Family Law Act.

This list is not exhaustive. Generally, the Courts will seek to evaluate the circumstances of each party, taking into account the size of the asset pool, the length of the relationship, and other personal circumstances pertaining to the parties, and attempt to divide the resource pool in a way that is just and equitable. 

Are BFAs set aside if one party is deceased?

Binding Financial Agreements will not necessarily be set aside in the case that one party is deceased. In this case, the agreement may continue operating through the estate of the deceased party, and will be binding on the legal personal representative of that party. 

Binding Financial Agreement FAQs

What is a Binding Financial Agreement?

A Binding Financial Agreement is a document, or a set of documents, that governs the property interests of a couple in a marriage or de facto relationship. They may be known more commonly as pre-nuptial (prenups), or post-nuptial agreements.  ‘Property interests’ generally means the ‘who gets what’ in the event of a relationship break down.

What assets can a BFA cover?

This can include assets, liabilities and financial resources such as: 

  • Real Estate; 
  • Vehicles;
  • Personal Items such as jewellery or artwork; 
  • Shares;
  • Debts;
  • Superannuation.

It may also provide an arrangement for spousal maintenance. 

When can a BFA be entered into?

These agreements can be entered into before, during or after a relationship. If you are looking to create an agreement after a relationship, this must occur within 12 months of a Divorce Order being made. Each Binding Financial Agreement will be different, depending on what stage of a relationship the parties are in. Different types of Binding Financial Agreements include: 

  • Cohabitation Agreement: where you are living together or planning to live together as a de-facto couple;  
  • Pre-Nuptial Agreement: if you are planning to marry; 
  • Post-Nuptial Agreement: if you are already married;
  • Separation Agreement: where you are already separated from your partner (however the agreement will differ slightly based on whether you were married or a de-facto couple before separation); 
  • Divorce Agreement: this must be entered into where a couple is divorced, or divorcing, and intends to settle their property interests through a Binding Financial Agreement. 

BFAs and Financial Disclosure

It is desirable for parties to exchange financial disclosure, for example, providing the other party with credit card statements, market appraisals for real estate, superannuation statements and the like. This will assist in ensuring that the agreement is comprehensive and is an effective distribution of the resource pool.


Each relationship is unique and thus requires careful consideration to ensure that each party can benefit from the agreement. Legal agreements such as these can be a useful tool in avoiding acrimonious disputes. It is important to secure considered advice from legal professionals to ensure that you are extracting maximal benefit from your separation. 

If you need further information regarding whether or not you may need to draft a Binding Financial Agreement, or want to further discuss this issue, get in touch with us via our contact form.

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