What are they?
Financial agreements are contracts binding two or more parties, before marriage, during the marriage or after a divorce order is made. This agreement can be made between same-sex or opposite-sex couples.
In a more simplistic term, they are similar to the familiar Pre-Nuptial Agreements. They, however, do not apply to either ante-nuptial or post-nuptial settlement.
Types of Financial Agreements
Financial Agreements can be entered into by the parties in the following circumstances:
If people are contemplating entering into a marriage, considering matters dealing with property or financial resources, make a written agreement, this financial agreement will apply to the marriage.
Before de facto relationship
If people are contemplating entering into a de facto relationship, considering matters dealing with property, financial resources or the maintenance of either or both parties make a written agreement, this financial agreement would apply to the de facto relationship.
If people, who are married, make a written agreement, in the contemplation of a marital breakdown, considering matters dealing with sharing of property, finances or the maintenance of either or both parties to the marriage or divorce, the financial agreement would apply.
During de facto relationship
If people, who are in a de facto relationship, make a written agreement, considering matters dealing with sharing of property, finances or the maintenance of either or both parties, this financial agreement would apply to the de facto relationship.
After divorce order is made
If after a divorce order is made with respect to a marriage, the people in the former marriage make a written agreement, considering matters dealing with sharing of property, finances or the maintenance of either or both parties, this financial agreement would apply (whether it has taken effect or not)
After breakdown of a de facto relationship
If after the breakdown of a de facto relationship, the people in the former de facto relationship make a written agreement, considering matters dealing with sharing of property, finances or the maintenance of either or both parties, this financial agreement would apply to the de facto relationship.
Advantages of Financial Agreements
A financial agreement could be beneficial to either party for the following reasons:
One significant advantage of having a financial agreement is that either party gets protected, especially some of their assets, an inheritance from the future or contributions made over the course of the relationship.
In most situations involving a breakdown of relationship between parties, they want to grab as much as they can. However, when there is a financial agreement in place, it prevents disharmony between former spouses when a separation occurs as the agreement ensures clarity to avoid a further breakdown in the relationship.
The parties to the financial agreement can also ensure that in the advent of a divorce or a separation, assets can be kept separate. Some of the things that can be kept separate are properties that could be inherited or given as a gift, business or assets in a Family Trust.
The parties to the agreement are reassured that the terms of the agreement would be adhered to. This is especially the case if either of the parties has been in a broken down relationship in the past.
Having a financial agreement makes a separation or divorce less stressful and simple. This is the case because the agreement specifies who owns what asset during or after the separation. Furthermore, parties circumvent a lengthy court trial and the process involved.
The parties to the Financial Agreement, have the prerogative to amend the terms of the agreement at any time in the relationship. Additionally, this can be done by drawing up a new Financial Agreement.
Having a Financial Agreement is a cost-effective solution, as it serves as a safety net for both parties. This ensures that in the occurrence of a separation, both parties will not spend financial resources trying to work out a deal.
Disadvantages of Financial Agreements
A financial agreement could be unsuited to either party for the following reasons:
The parties in a Financial Agreement must seek independent legal advice before drawing up an agreement. This could be expensive and take much time and is not the case with Consent Orders.
The terms of a Financial Agreement may not take into consideration, the future financial circumstance of either party in the event of a separation. It only takes into account, the present financial situation of each party which could change in the future. What may seem like a favourable agreement when it is being drawn up may look unfavourable at the time of separation.
The Financial Agreement, according to the Family Law Act does not have to be fair and won’t be void for lack of fairness, but for other reasons stated in the act such as Fraud.
This area of law is fraught with complexity. A Financial Agreement is hard to set aside because one party has a change of heart. This can result in a costly process for both parties, as the consent of the party has to be obtained. For the court to grant this request, it should be on the grounds of fraud, duress or non-disclosure which is a costly process.
Are they binding?
Financial Agreements are contractual agreements and the terms bind the parties to the agreement. However, certain elements have to be present, namely:
- The agreement is signed by both parties;
- Independent Legal Advice: The agreement should contain a statement that each party has sought independent legal advice before signing the agreement (on matters such as advantages and disadvantages of a financial agreement);
- The legal practitioner should furnish each party with a signed statement, declaring that it had provided legal advice on the subject above;
- The financial agreement between the parties has not been set aside by a court; and
- The original agreement is given to each of the parties.
Enforcing Financial Agreements
For a Financial Agreement to be enforceable, this would be determined by the court, taking into consideration the principles of law and equity.
Setting aside Financial Agreements
A Financial Agreement has the elements of a contract and can be set aside for various reasons, including:
- Fraud (including non-disclosure of a material matter);
- Defrauding Creditors. The intention of entering the Financial Agreement is to defraud the creditors of the other party;
- Recklessness. One party does not have any regard for the creditor of the other party;
- Defrauding Party in De Facto relationship;
- Defrauding other Party in issues relating to pending orders on alteration to property interests or Declaration of property interests; and
- Change in circumstances. This could arise where issues’ relating to the maintenance and welfare of an offspring from the marriage has occurred. The financial agreement would have to be set aside to prevent any hardship to the child.