How ‘binding’ is a binding financial agreement?

by Sarah Coombs

A Binding Financial Agreement is a document drawn up by parties to a relationship to protect their assets in the event of a breakdown of the relationship. This can be done at the start of a relationship (similar to the American “pre-nup”) or at the end of a relationship instead of seeking a court order. But how long do these agreements apply for and can they be set aside in the future?


There are 8 different circumstances where a Court can set aside a Binding Financial Agreement, however all of these circumstances place a heavy burden on the applicant to demonstrate to the Court why the agreement should be set aside.

The 8 circumstances are:

  1. The agreement was obtained by fraud. This means that one party used false means to obtain an advantage over the other party that they may not have had if they had acted fairly.
  2. That one of the parties entered into the agreement with the purpose of defrauding creditors or was reckless to the consequences of a creditor. This means that a party to the agreement did not take into consideration a loan they had to a third party.
  3. The agreement is void or unenforceable.Examples of when an agreement might be void or unenforceable is when one party is made to sign under duress from the other party or one party has an influence over the other to make them sign.
  4. Where circumstances have arisen since the making of the agreement that mean the agreement is impracticable for the agreement to be carried out. For example, one party may not be able to refinance a home to complete the agreement.
  5. That circumstances have changed since the making of the agreement regarding the care of a child of the relationship that it would impose hardship on the Applicant if not enforced.This needs to be a martial change in circumstances or exception circumstances.
  6. That a party to the agreement engaged in unconscionable conduct, which means that one party has a “disability” in negotiating the agreement and the other party takes advantage of that “disability”. This disability can be factors such as age, sex, sickness, illiteracy, lack of education or lack of explanation when necessary.
  7. When there is a payment flag over a superannuation fund affected by the agreement and the payment flag will likely not be removed. A payment flag is an order binding a superannuation fund from making any further payments from the fund. These can only be placed on a super fund by court order or superannuation agreement and can only be removed in the same manner.
  8. That the agreement covers a superannuation interest that is unable to be split between the parties.

It is worth noting that a Binding Financial Agreement is binding after the death of a party to the agreement. The Legal Personal Representative is then bound by the agreement and any party wishing to have the agreement set aside will need to use the above-mentioned grounds.

Should a party wish to have an agreement set aside, they will require thorough evidence and  will likely face lengthy court proceedings. The court does not set aside a Binding financial agreement lightly and therefore we recommend that anyone seeking to do this seek legal advice that is tailored to their circumstances.

Binding financial agreement

For more information, click here.