amendments relaxes financial agreement rules
the requirements for binding financial agreements have been changed to relax the rules. the statement of legal advice may be provided before or after the party signs the agreement.
The original requirements for the validity of Binding Financial Agreements (BFA) were so strict that it was always possible to assail the validity of BFAs. Legal practitioners have lost confidence in the BFA and find it useless if it was so easy to invalidate.
BFAs are intended to be a practical way of establishing property settlement in the relationship or marriage. Parties, at the time of the execution of the BFA, control and decide how their properties are going to be owned, divided or shared.
Binding financial agreements first became applicable for married couples in December 27, 2000. On March 1, 2009, States and Territories allowed BFAs for de facto couples. The concerns raised against the fallibility of BFAs resulted in the amendment of the Family Law Act 1975. The amendments changed some of the requirements for entering into a BFA. The rules were relaxed such that a BFA could not easily be held unenforceable for failure to comply with the formal or procedural requirements.
One of the changes refers to the independent legal advice that must be provided to each party. Instead of requiring a certificate of legal advice, the law now states that independent legal advice must be provided before the party signs the agreement. So now, it is no longer required that the certificate of independent legal advice be included in the agreement.
As for the signed statement that legal advice has been provided, it may be issued before or after signing the agreement. The certificate of legal advice is not anymore required to be attached to the BFA. The BFA will still be valid if the statement is issued after the party has already signed the agreement.
It bears stressing out that a BFA operates to exclude the court from the property settlement of the parties. This is the reason why the original law only imposed the highest standards for the execution of BFAs. Legislators sought to protect parties from imprudently entering into BFAs without knowing about the legal consequences of the agreement. By imposing strict requirements on independent legal advice, fraud, coercion and undue influence are prevented from being factors that induce a party in entering into the agreement.
The reforms both have advantages and disadvantages. An advantage is that BFAs will be upheld as a valid property settlement between the parties. Courts and parties will no longer have to through an exhaustive property settlement dispute. Court dockets are declogged and parties do not have to spend for legal fees.
Having the BFA invalidated is a costly way of changing one’s mind about property settlement. More importantly, parties who enter into BFAs are confident and assured that the agreement will not be so easily set aside because of procedural defects.
The danger with the lenient requirements is that the rights of parties might not be protected. Parties who are not so adept with the law and legal processes are in danger of being exploited or deceived. The BFA itself might not encompass issues that should be settled in a property settlement such that property issues would continue to hound parties in spite of the agreement.
Just to be safe rather than sorry later, the best practice is for legal practitioners to attach the statement of legal advice to the BFA. This practice ensures the enforceability of the agreement.
Disclaimer : This article provides basic information only and is not a substitute for a professional or legal advice. It is prudent to obtain legal advice from a family lawyer.