Most divorce or separation cases are messy. It even gets messier when property disputes and financial matters get in between the two parties. When property and financial issues get out of hand, it is easy to resort to court proceedings. But why go through all those stresses and conflicts? There are many ways to deal with it in an orderly and less problematic manner. Unified Lawyers states that couples who go through separation or divorce can always opt for mediation. Mediation is a cost-time and effective way to settle any disputes between the two parties. This is when financial agreements, specifically Binding Financial Agreements, can enter into play and make the whole ordeal manageable and amicable.
Binding Financial Agreements—What Are These?
Binding Financial Agreements or BFAs are agreements used before, during, or after a union of a couple or a de facto relationship. The BFA is made under the Family Law Act. Getting into this type of agreement gives couples peace of mind since it can help avoid addressing problems to the Family court, which can be stressful and costly.
The BFA helps couples to plan in advance on how to divide their assets, liabilities, and financial resources accordingly upon divorce or separation. Upon making and signing this agreement, it is understood that both parties will lose the right to claim what the other party will receive by then. Otherwise, the party who has an unjust view of the circumstance can ask the Family Courts to make the final decision of the division of assets and liabilities upon divorce or separation.
Types of BFAs You Can Enter
BFAs have five types: Prenuptial Agreement, Post-Nuptial Agreement, Cohabitation Agreement, Divorce Agreement, and Separation Agreement. Determining the right type for your BFA depends on the type of relationship you are currently involved in. If you are about to get married or already married, you can get into either Prenuptial and Post-Nuptial Agreements. If you are in a de facto relationship and currently cohabiting, the Cohabitation Agreement suits you. If you are either married or cohabiting, but then you decided to go separate ways, the Separation Agreement is applicable. On the other hand, Divorce Agreements can be used for divorced couples when settling their properties.
Requirements that Makes a BFA Valid
For a BFA to be legal and enforceable, it should follow the following requirements:
- The agreement is duly signed by the two involved parties.
- The agreement is only signed after each party has had their own legal advisor provide advice on the specific type of agreement.
- A signed statement from each party that shows that they have received legal advice.
- Each party should receive a copy of the said signed statement of the other party.
What Challenges the Validity of a BFA?
There are cases wherein the enforceability and validity of BFAs will be set aside. These include:
- The agreement fails to meet the requirements mentioned above. The Family Court is responsible for determining and checking whether it’s rightful or unjust to do so.
- The agreement is drafted in a manner that does not conform to the standards of the Family Law Act.
- The agreement contains terms and conditions that go against any aspect of the Family Law Act.
- The agreement contains terms and conditions that go against any existing general law on contracts.
Scenarios When a BFA Loses its Enforceability
Even if your BFA completely secured the requirements needed, there are still instances when its validity and enforceability will be put into a test. The Family Law Act has specifically listed the possible scenarios that the Family Court can decide to set aside a BFA. Such scenarios include:
- When one party signs the agreement as a result of fraud, duress, influence, mistake, and misrepresentation
- When one party fails to disclose their assets and liabilities to the other party, e.g., financial position
- When the agreement itself is unenforceable, void, or voidable under law
- When there are critical changes in circumstances that make the agreement impractical
- When one party only made the agreement without the other party
- When there are changes in the circumstance such as when a child comes into play
The Million-Dollar Question
So, how binding exactly is a BFA? No one can guarantee the binding ability and the enforceability of Binding Financial Agreements. This is because of the possibility that the other party will apply to the court to have the agreement set aside. However, this should not worry you about the other party because having an agreement in the first place can already decrease the possibility of having a court action. Even if the BFA is successfully raised to the Court, any Court will not make any interference for the sole basis that one party finds the agreement terms unfair.
For any couple who sees the BFA as a factor that provides security upon entering a relationship, then, by all means, a BFA is indeed binding. However, both parties should be aware of the fact that along their journey as a couple, they might face circumstances that put the BFA at risk. Such risk will eventually result in any changes in the enforceability and invalidity of the BFA.
In the end, the binding ability of BFAs would only rely on each of the party’s sense of responsibility and cooperation and a keen eye on details. By possessing such traits, the binding effect of BFAs will likely be less of a debatable question. It is in this way that separation and divorce processes will be less costly and messy than it already is. Life is anything but certain. When getting into life-changing decisions such as marriage or getting into a de facto relationship, it may be better to keep your assets safe with an agreement than be sorry.