A Binding Financial Agreement (or BFA) is a private agreement entered into by parties to a relationship to settle their property affairs. A BFA is essentially a contract that allows parties to avoid going to court, and can dictate how their property is to be dealt with, as well as what maintenance might be payable by one party to another.
When can a binding financial agreement be used?
A Binding Financial Agreement can be entered into before, during or after the breakdown of a relationship. This applies to both marriages, and de facto relationships, both of which fall within the ambit of the Family Law Act 1975 (Cth).
Under the Act s 90D provides for the making such agreements and after the breakdown of a marriage, subsequent to a divorce order being made. The Act, under s 90B and s 90C, also provides for the making of a financial agreement before the commencement of, and during, a marriage.
Furthermore, s 90UD provides for the making of such agreements following the breakdown of a de facto relationship. The Act also provides for the making of a financial agreement before the commencement of, and during, said de facto relationship.
The provisions that describe the circumstances in which a Binding Financial Agreement may be set aside are contained in s 90K of the Act for a marriage, and s 90UM for de facto couples.
advantages and disadvantages
There are a number of formal requirements that must be met in order to make a valid and binding BFA. This means that it ought to be professionally drafted, and can still incur expense.
Each party must obtain a certificate from a legal practitioner confirming that they have been advised, independently of the other party, as to the direct effects of the agreement upon them. This is largely due to a key disadvantage of the Binding Financial Agreement – it is not necessarily scrutinised by the Court to ensure that it is just and fair.
A Binding Financial Agreement is not an order of the Court. Its terms therefore do not carry the same weight as Court orders, but are more correctly likened to terms of a contract – where there may be consequences of non-compliance, but there are also ways to have the agreement set aside.
The advantages of entering into a Binding Financial Agreement are that parties can arrange between themselves what they consider to be an equitable distribution of their assets whilst negating the need for court involvement. Binding Financial Agreements are also not limited to statutory limitation periods, and are therefore seen as being somewhat more flexible in some circumstances.
At Bainbridge Legal we are willing to advise parties on their proposed Binding Financial Agreements, and even draft Binding Financial Agreements at your request. That said, we do accept that there are risks attached. Binding Financial Agreements can be set aside under some limited circumstances, and arguably more prone to being unfair or unjust towards one party. Notwithstanding this, we understand that Binding Financial Agreements have an important place in the Family Law jurisdiction. They allow parties to enter into agreements when they might otherwise have been statute barred from filing in Court, it also allows parties to make agreements before and during a relationship.
If you would like some advice as to the best way to proceed in settling your property affairs, then please contact our office today and one of our experienced family lawyers will be happy to discuss what best suits your circumstances.