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Having a properly drafted Binding Financial Agreement (or BFA) can be an effective way for a de-facto or married couple to determine how their assets will be divided in the event of a separation.

Binding Financial Agreements can be entered into prior to the commencement of the relationship, during the period of the relationship, or even after the relationship has broken down.



Binding financial agreements entered into prior to commencing or during a relationship are commonly known as pre-nuptial agreements (or pre-nups). Post Nuptial agreements (or post-nups) on the other hand are entered into during the period of the relationship. Both of these types of agreements are used by couples to specify how they want their assets to be divided if they separate in the future.

This is often a very sensible step to take particularly if one party holds substantial assets that they have acquired prior to the commencement of the relationship.


A Binding Financial Agreement can also be entered into after the relationship has broken down. This type of agreement allows the couple to formalise a mutually agreed property settlement into a legally binding and enforceable contract. Provided that the provisions set out in the Family Law Act relating to Binding Financial Agreements are adhered to, these agreements are considered both binding and legally enforceable. The most appealing feature however is that they don’t require the parties to go to court to formalize their property settlement.


The recent High Court decision in Thorne v Kennedy [2017] HCA 49; (2017) FLC 93-807 caused somewhat of an uproar in the legal profession and cast considerable doubt on the validity of binding financial agreements, particularly those that appear to weigh heavily in favour one party over the other.

In that case, the wife was a 36 year old woman from Greece with no children and only assets of nominal value. The husband on the other hand was a 67 year old divorced Australian property developer with $18 million worth of assets and three adult children. After a period of dating the parties became engaged and wife relocated to Australia to be with the husband.

Ten days out from the wedding, the husband presented the wife with a pre-nuptial agreement. By that stage, the wife’s parents and extended family members had all flown to Australia from Eastern Europe for the wedding. The husband told the wife that if she did not sign the agreement the wedding would be called off. Prior to signing the agreement, the wife sought independent legal advice. Her solicitor advised her both orally and in writing not to sign the agreement as it significantly favored the husband’s. After some minor changes were made to amend the agreement the wife again sought legal advice. She was informed by her solicitor at the time that this was the worst agreement the solicitor had ever seen. Under the terms of the agreement, the wife was to receive a total payment of

$50,000 plus CPI in the event of a separation after at least three years of marriage, which the wife’s solicitor described as “piteously small”. In the event of the husband’s death, out of the husband’s $18 million dollar estate, the wife would receive an apartment worth up to $1.5M, a Mercedes and a meagre continuing income. The wife signed the agreement four days before the wedding.

The first agreement contained a recital that within 30 days the parties would sign another agreement in similar terms. In November the wife signed the second agreement, revoking the first agreement but otherwise in the same terms. During the meeting with her solicitor the wife received a telephone call from the husband asking her how much longer she would be.  The wife’s solicitor had the impression that the wife was being pressured to sign the second agreement. Unanimously, the High Court set aside the two agreements for unconscionable conduct. The plurality also set them aside for undue influence, finding it unnecessary to decide whether there was duress.



Whilst the case of Thorne & Kennedy certainly serves as a valuable warning for solicitors to proceed with caution where there is an unequal bargaining power evident between the parties, it certainly does not mean the end of BFA’s altogether.

Like most types of contract there will always be factors that can cause a BFA to be overturned by the court. For that reason, it is important to make sure that you instruct a family law solicitor with experience in this area.

Your solicitor will be able to advise you whether or not a BFA is the most suitable option for your needs and advise you about common factors that can cause a BFA to be set aside, such as:

  • non-disclosure;
  • duress; or
  • a significant change in circumstances

A significant change in circumstances might include having a child together or a change in health. For this reason, it is important to ensure that if you enter into a BFA that you regularly review and update it where necessary.


A Binding Financial Agreement can be “terminated” in one of two ways:

  • The parties can enter into another financial agreement, provided that a specific provision is included in the new agreement specifying the termination of the former agreement; or
  • Pursuant to section 90J of the Family Law Act (for married couples) or section 90UL (for de facto couples) the parties can enter into a “termination agreement” .

As with the original BFA, for a termination agreement to be binding and enforceable, it must be signed by all parties to the agreement, and each of the parties must have received independent legal advice with respect to the termination agreement.

If you are considering entering into a Binding Financial Agreement and would like to talk to a family law solicitor about whether this is the right option for you, call and speak to one of our family law solicitors today.


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