Signing a financial agreement without fully understanding its legal effect can create significant uncertainty, particularly when the document is intended to operate as a binding financial agreement.
Under the Family Law Act 1975, financial agreements are subject to specific statutory requirements before they will ordinarily be binding. These include requirements concerning independent legal advice. The precise provisions that apply depend on the type of financial agreement and the parties’ circumstances. (Federal Register of Legislation)
If you have already signed an agreement without receiving independent legal advice, however, you should not automatically assume that the agreement is valid, invalid or something you can simply ignore. The agreement itself and the circumstances surrounding its preparation and execution need to be considered.
Speaking with Financial Agreement lawyers in Perth can help you understand how the relevant requirements may apply to your particular situation.
What Is a Binding Financial Agreement?
A financial agreement is an agreement that can deal with certain financial matters between couples, including how property or financial resources may be dealt with in the event of a relationship breakdown and, subject to applicable legal requirements, maintenance matters.
Financial agreements can be made in different circumstances, including in connection with marriages and de facto relationships.
The Family Law Act 1975 contains separate provisions dealing with different categories of financial agreements. For example, Part VIIIA deals with financial agreements relating to marriages, while Part VIIIAB contains provisions concerning financial matters relating to de facto relationships. (Federal Register of Legislation)
A properly prepared agreement can provide greater clarity about how specified financial matters will be handled if a relationship ends. However, simply calling a document a “Binding Financial Agreement” does not by itself establish that all applicable statutory requirements have been satisfied.
Why Is Independent Legal Advice Important?
Independent legal advice is more than an administrative formality.
For marriage-related financial agreements, section 90G of the Family Law Act 1975 provides that, subject to the provisions of the section, each spouse party must receive independent legal advice before signing concerning:
- The effect of the agreement on that party’s rights.
- The advantages of entering into the agreement.
- The disadvantages of entering into the agreement.
The legislation also contains requirements concerning a signed statement from the legal practitioner confirming that the advice was provided. Corresponding provisions for relevant de facto financial agreements appear in section 90UJ. (Federal Register of Legislation)
Independent advice helps ensure that each party has an opportunity to understand the legal consequences of the proposed agreement from the perspective of their own interests.
What If You Already Signed Without Independent Legal Advice?
If you have already signed a financial agreement without obtaining independent legal advice, avoid jumping to conclusions about its legal effect.
Whether the agreement satisfies the statutory requirements for being binding can depend on the particular agreement, the type of relationship, how the agreement was prepared and executed, and other relevant circumstances.
The legislation also contains provisions dealing with circumstances in which particular requirements may not have been satisfied. This is one reason an agreement should be individually reviewed rather than treated as automatically enforceable or automatically ineffective. (Federal Register of Legislation)
If the agreement could affect a property settlement or maintenance issue, obtaining advice early may be particularly important.
Is “Not Binding” the Same as “Being Set Aside”?
Not necessarily.
This distinction is important when discussing financial agreements.
Whether an agreement satisfies the statutory requirements for being binding and whether a court has grounds to set the agreement aside involve different legal questions.
For example, section 90G addresses when relevant marriage-related financial agreements are binding. Section 90K separately identifies circumstances in which a court may set aside a financial agreement or termination agreement. (Federal Register of Legislation)
Therefore, a person should not assume that an issue concerning independent legal advice automatically determines every other question concerning the agreement.
Can a Financial Agreement Be Set Aside?
In certain circumstances, a court may set aside a financial agreement.
Section 90K of the Family Law Act 1975 contains statutory grounds upon which this may occur. For example, the legislation expressly identifies fraud, including non-disclosure of a material matter, as one of the circumstances that may be relevant. Other statutory grounds may also apply depending on the facts. (Federal Register of Legislation)
However, signing an agreement without independent legal advice should not be treated as an automatic guarantee that a court will set it aside.
A lawyer should review the actual agreement and the circumstances surrounding its negotiation, preparation and signing before advising on its legal effect.
What Problems Can Arise Without Independent Legal Advice?
A person signing without appropriate advice may not fully understand:
- Which property and financial resources are affected.
- How the agreement may affect existing legal rights.
- Whether and how the agreement addresses maintenance.
- What financial rights may be restricted or altered.
- What obligations the agreement creates.
- Whether the statutory requirements for the relevant financial agreement have been satisfied.
- How the agreement could operate following a relationship breakdown.
These issues may become particularly significant when there is a substantial difference between the parties’ financial positions, complicated business or trust structures, significant property holdings or other substantial financial resources.
Can Your Partner’s Lawyer Advise You?
The purpose of independent legal advice is for each party to receive advice directed to their own position.
You should therefore not assume that advice provided by your partner’s lawyer satisfies your need for independent advice.
If you are being asked to enter into a financial agreement, obtaining advice from your own lawyer gives you an opportunity to understand how the proposed agreement affects your rights and interests before you sign it.
What Should You Do Before Signing a Financial Agreement?
If you have received a proposed agreement but have not yet signed it, consider taking the following steps:
- Read the complete agreement. Do not rely solely on a summary provided by your partner or another person.
- Provide relevant financial information. Your lawyer may need information about assets, liabilities, income and other financial circumstances to advise you properly.
- Obtain independent legal advice. Ask your own lawyer to explain the agreement’s effect on your rights and its potential advantages and disadvantages.
- Ask questions. Do not sign a clause you do not understand.
- Allow sufficient time. Avoid leaving legal advice until immediately before a wedding, settlement or other significant deadline.
- Keep relevant documents. Retain copies of the agreement, legal-advice statements and important correspondence.
What If You’ve Already Signed?
If you have already signed and now have concerns, the most useful first step is usually to have the actual agreement reviewed.
Consider gathering:
- The complete signed financial agreement.
- Any legal-advice certificates or signed statements.
- Earlier drafts of the agreement.
- Emails and other correspondence concerning its negotiation.
- Financial disclosure exchanged between the parties.
- Records showing when you first received the agreement.
- Information about the circumstances in which it was signed.
- Any later agreements or amendments.
- Information about significant changes in circumstances.
A family lawyer can determine which of these documents are relevant to the particular issues affecting your agreement.
Avoid These Common Assumptions
If you’ve already signed a financial agreement, don’t automatically assume:
- The agreement is invalid because you did not obtain legal advice.
- The agreement must be enforceable because both parties signed it.
- You can simply ignore the agreement.
- Lack of independent advice automatically means a court will set it aside.
- Your partner’s lawyer was also protecting your interests.
- General information found online determines the legal effect of your particular agreement.
The safest approach is to have the agreement and surrounding circumstances professionally assessed.
Can a Lawyer Review an Agreement After It Has Been Signed?
Yes.
Obtaining legal advice after signing may help you understand the document’s terms, the statutory issues that may arise and what options may be available.
This can be particularly important if separation has occurred or appears likely and the agreement could affect property or maintenance matters.
Experienced family law lawyers can review the agreement and explain the relevant legal considerations based on the circumstances.
Can a Financial Agreement Be Terminated?
The Family Law Act 1975 provides mechanisms for terminating relevant financial agreements.
For marriage-related financial agreements, section 90J provides for termination through another qualifying financial agreement or through a written termination agreement, subject to the applicable statutory requirements. (Federal Register of Legislation)
This means parties should not simply assume that mutually deciding to disregard an existing agreement is necessarily sufficient.
Legal advice should be obtained where parties want to formally terminate or replace an existing financial agreement.
Frequently Asked Questions
Is a financial agreement valid without independent legal advice?
The Family Law Act 1975 contains specific requirements concerning independent legal advice for relevant financial agreements. However, the legal consequences of failing to satisfy a requirement can depend on the type of agreement and the circumstances.
The actual agreement should therefore be reviewed rather than assuming that it is automatically binding or automatically ineffective.
Can I challenge a financial agreement I signed without legal advice?
Potentially, depending on the circumstances. Questions about whether an agreement is binding and whether there are grounds for a court to set it aside require consideration of the applicable statutory provisions and the particular facts.
Can I obtain legal advice after signing?
Yes. A lawyer can review an agreement that has already been signed and advise you about its terms and the legal issues that may arise.
Does my partner’s lawyer count as my independent lawyer?
Independent legal advice is intended to address your own rights and the advantages and disadvantages of entering into the agreement from your position. You should obtain advice from your own independent legal practitioner.
Is a financial agreement automatically binding once both parties sign?
No. Signing is an important requirement, but it is not the only statutory consideration. For example, section 90G identifies several requirements relevant to whether marriage-related financial agreements are binding. (Federal Register of Legislation)
Can a BFA be changed or terminated?
The legislation provides mechanisms for dealing with termination of financial agreements, subject to the applicable requirements. If parties want to replace, vary or terminate an arrangement, they should obtain legal advice about the appropriate process.
When Should You Speak With a Family Lawyer?
Consider obtaining advice if:
- You have received a financial agreement and are being asked to sign it.
- You have already signed without independent legal advice.
- You do not understand how the agreement affects your property rights.
- You believe important financial information was not disclosed.
- You felt significant pressure surrounding the signing of the agreement.
- You are separating and the other party intends to rely on the agreement.
- You want to terminate or replace an existing agreement.
A lawyer experienced in financial agreements can assess the document itself rather than relying on assumptions about whether it is binding.
Get Independent Advice Before Relying on a Financial Agreement
Signing a financial agreement without independent legal advice can raise important questions about its legal effect. However, the absence of advice should not be treated as providing a simple answer about whether the agreement is binding or what will happen if it is disputed.
If you have already signed an agreement, have the document and the circumstances surrounding it assessed before deciding what to do next.
Similarly, if you are considering signing a financial agreement, obtaining independent advice beforehand can help you understand the effect of the agreement on your rights and its potential advantages and disadvantages.
For people dealing with these issues in Western Australia, experienced Financial Agreement lawyers in Perth can provide advice based on the particular agreement and circumstances.
Important: This article provides general information about financial agreements under Australian family law. It is not legal advice and should not be relied upon as a substitute for advice about your individual circumstances.
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