Binding Financial Agreements (BFAs)

Types of Binding Financial Agreements

Part VIIIA of the Family Law Act 1975 provides for three types of BFAs for married couples, depending on when the agreement is made. Each type is named for the section that governs it.

Section 90B — Before marriage (prenuptial agreement)

Section 90B agreements are made by people who are contemplating marriage and will only take effect if the marriage proceeds. They can cover how property and financial resources will be dealt with upon breakdown, spousal maintenance (if any) payable in the event of separation, and any other matters incidental to those matters.

Section 90C — During marriage

Section 90C agreements are made at any time while the marriage continues — including to formalise arrangements after the parties have already separated, to update an earlier Section 90B agreement, or to provide certainty about property arrangements during the marriage.

Section 90D — After divorce

Section 90D agreements are made after a divorce order has taken effect. They allow former spouses to privately settle property and maintenance matters as an alternative to consent orders, without court involvement or approval, finalising all financial matters between them.

Requirements for a valid BFA (Section 90G)

Section 90G sets out the strict requirements that must be met for a BFA to be binding. If any requirement is not satisfied, the agreement is not a "binding" financial agreement.

• Written and signed — the agreement must be in writing and signed by all parties. Electronic signatures may be valid in some circumstances.
• Independent legal advice — before signing, each party must receive advice from an independent legal practitioner about the effect of the agreement on their rights and the advantages and disadvantages of making the agreement at the time the advice was provided.
• Lawyer's certificate — a signed statement (annexure) from each party's legal practitioner must be attached to the agreement, certifying that advice was provided in accordance with the Act. Each party must have their own separate lawyer.
• Not terminated or set aside — the agreement must not have been terminated by the parties or set aside by a court. A subsequent BFA may expressly terminate an earlier one.

When a BFA may be set aside (Section 90K)

Even if a BFA meets the formal requirements under Section 90G, a court may set it aside under Section 90K in certain circumstances. The grounds include:

• Fraud — the agreement was obtained by fraud, including non-disclosure of a material matter.
• Failure to disclose — a party failed to disclose material assets, liabilities, or financial circumstances before the agreement was made.
• Contract law grounds — the agreement is void, voidable, or unenforceable under general contract law (e.g., misrepresentation, duress, undue influence, unconscionable conduct).
• Changed circumstances — circumstances have changed since the agreement was made, making it impracticable for the agreement (or part of it) to be carried out.
• Unconscionable conduct — a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable.
• Child support exception — if a child support agreement is included, a court may set it aside if it is not proper to apply the child support provisions.

Thorne v Kennedy [2017] HCA 49

This landmark High Court decision provides important guidance on when BFAs may be set aside on the grounds of undue influence or unconscionable conduct.

Ms Thorne, an Eastern European woman, came to Australia to marry Mr Kennedy, a wealthy property developer. Shortly before the wedding, Mr Kennedy presented a prenuptial agreement that would leave Ms Thorne with very little if the marriage ended. Despite her lawyer's strong advice not to sign, Ms Thorne signed the agreement under significant pressure.

The High Court unanimously set aside the agreement, finding both undue influence and unconscionable conduct. The court identified that the "pressure to sign was so great as to deprive Ms Thorne of her free will."

Vitiating factors identified

• Agreement presented close to the wedding
• Significant inequality of bargaining power
• Emotional circumstances and pressure
• Limited time to consider the agreement
• Signing against legal advice
• Drastic consequences for the weaker party

BFAs vs consent orders

There are two main ways to formalise a property settlement: a Binding Financial Agreement or Consent Orders. Each has distinct advantages and disadvantages.

Consent orders are generally more secure because they are approved by the court and are difficult to challenge. BFAs offer more privacy and flexibility but carry greater risk of being set aside. For most separating couples, consent orders are the preferred option. BFAs are more commonly used before or during relationships to protect pre-relationship assets.

Practical steps for creating a BFA

To maximise the chances of a BFA being upheld, follow these practical steps from the outset.

1. Allow adequate time — don't leave the agreement until the last minute. Provide enough time for both parties to consider the terms, obtain legal advice, and negotiate changes if needed.
2. Full financial disclosure — both parties should provide complete disclosure of their assets, liabilities, income, and financial circumstances. Consider attaching schedules of assets and liabilities to the agreement.
3. Separate independent lawyers — each party must receive advice from their own independent lawyer. The lawyers should be from different firms. Do not try to share lawyers to save costs.
4. Ensure fair terms — while a BFA doesn't need to be "just and equitable," grossly unfair terms increase the risk of the agreement being set aside as unconscionable.
5. Document the process — keep records of all negotiations, draft exchanges, and the time allowed for consideration. This can help demonstrate the agreement was entered into freely.

Common questions