When people enter into an agreement the usual intention is for the agreement to be binding on all parties. Financial Agreements are no exception. However, both lawyers and spouse parties are often reluctant to prepare and/or enter into a financial agreement, for fear that the financial agreement may later be found to be non-binding on the parties. The questions therefore are: when is a financial agreement binding on the parties and what makes financial agreements binding? In this post, New South Lawyers’ Family Lawyers share their thoughts on the topic.

When are financial agreements binding?

The law states that for a financial agreement to be binding on the parties, certain provisions of the Family Law Act must be met. For married couples entering into a financial agreement, the parties must meet the requirements in s 90G(1) and for de facto couples entering into a financial agreement they must comply with the requirements in s 90UJ(1).

Independent legal advice

Under s 90G(1)(b) and s 90UJ(1)(b), for a financial agreement to be binding, it is an obligatory requirement for each spouse party to the financial agreement to receive independent legal advice from an Australian Legal Practitioner regarding:

Firstly, the effect of the agreement on the rights of that party. 

Secondly,  the advantages and disadvantages to that party of making the agreement, at the time that the advice was provided.

Legal advice for Third Parties who are not spousal parties to a Financial Agreement

While it is prudent and advisable for third parties to a financial agreement to receive independent legal advice, the law does not impose any legal requirement for third parties (who are not spouse parties) to obtain legal advice on the financial agreement.

Who is required prove that a Financial Agreement is binding?

Once the party relying on the financial agreement produces the statement signed by the other party’s solicitor, the statement is considered evidence of that the financial agreement is binding unless the other party provides evidence to the contrary.  

According to case law, it is the responsibility of the person seeking to rely on a financial agreement,  who is to prove that the financial agreement is binding, by producing what is known as the s 90 G Statement for financial agreements entered into by married couples or s 90UJ Statement for financial agreements entered into by de facto couples. The statements produced must have been signed by the parties’ solicitors.

Quality of the advice provided 

While it is tempting to simply get a lawyer to sign a statement confirming legal advice has been provided, a financial agreement may be found not to be binding if the quality of the advice provided is in question, or if no advice relating to the financial agreement was provided despite signing the statement. It is in the interest of the parties to the financial agreement to ensure that any advice provided in accordance with s 90G or 90UJ  is real, meaningful and recorded.

Points to note when obtaining legal advice 

It is important to note the following points when obtaining legal advice. Firstly, the advice provided to each party must be independent. This includes each party making independent arrangements to obtain legal advice.

Secondly, it is not advisable for the legal practitioner of a party to recommend a specific legal practitioner to be used by the other party for legal advice.

Thirdly, keeping a record of the advice provided by the legal practitioner is essential.

Fourthly, the advice must be provided in the absence of the other party to the financial agreement to eliminate any doubt that the advice provided was not independent.

Finally, each party must obtain the legal advice from a competent legal practitioner.

Can a Financial Agreement be saved - s90G (1A)?

As noted above, a financial agreement is binding if it complies with s90G(1) or s 90UJ(1). If a financial agreement is held to be none binding due to non-compliance with s90G(1) or s 90UJ(1),  we note that s 90G(1A) or s 90UJ(1A) of the Family Law Act provide an opportunity for the otherwise defective financial agreement to be saved, provided the Court is satisfied that it will be unjust and unfair for the agreement not to be binding.

In conclusion

For a financial agreement to be binding on the parties, it must fulfill the following criteria. 

Firstly,  it must be signed by all parties to the financial agreement. 

Secondly, before signing the agreement, each spouse party must obtain independent legal advice from an independent legal practitioner about (a)  the effect of the agreement on the rights of that party; and (b)  the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement. 

Thirdly, either before or after signing the agreement, each spouse party must be provided with a signed statement by the legal practitioner stating that the party received the advice referred to in paragraph (2) above. 

Fourthly, the spouse parties to the financial agreement must exchange the statement such that each spouse party retains the signed statement of independent advice provided by the other party’s legal practitioner. 

Finally, the agreement has not been terminated and has not been set aside by a court.

New South Lawyers have experience in drafting and advising on financial agreements. We note that the above is not legal advice and has been written for information purposes only.

New South Lawyers’ communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication.

To find out more, chat with a member of New South Lawyers' Family Law Team today.