Binding Financial Agreements

A Financial Agreement (often referred to as a ‘Binding Financial Agreement’ or ‘pre-nup’) is a legally binding document that sets out how to divide you and your partner’s property, finances, assets, and liabilities should your relationship break down.

Financial Agreements can also cover spousal and child maintenance, superannuation and inheritance and may consider family trusts and other incidental financial issues.

The purpose of a Financial Agreement is to avoid the need for you and your partner to have the family courts decide on property matters if you separate or divorce. They do not require approval of a court but, to be enforceable and effective, must be made strictly in accordance with the requirements of the Family Law Act.

Financial Agreements can be made before, during or after the start of a marriage or de facto relationship. Different types of Financial Agreements can be used, depending on the nature and timing of the relationship. For example:

  • Pre-nuptial Agreement
  • Post-nuptial Agreement
  • Pre-cohabitation Agreement
  • Cohabitation Agreement
  • Separation Agreement
  • Divorce Agreement

Is a Financial Agreement legally binding?

For a Financial Agreement to be legally binding and enforceable, it must comply with the Family Law Act, which states that both parties must freely enter into the Agreement and understand its effect.

The documentation must comply strictly with prescribed requirements and each party must obtain independent legal advice, ideally from a family law specialist, prior to signing.

What if I want to terminate a Financial Agreement?

Should you or your partner wish to terminate a Financial Agreement it can be done in one of two ways: you can both enter into another financial agreement, or enter into a ‘termination agreement.’

How can a Financial Agreement be void by the Court?

The strength of a Financial Agreement is usually tested when one party fails to carry out his or her obligations under its terms. In such cases, the other party may apply to the court to have the agreement enforced. In addition to issues concerning the formalities of the Agreement, the following circumstances may persuade a court to set a Financial Agreement aside:


A Financial Agreement obtained under fraudulent circumstances, such as the non-disclosure of a significant asset by one of the parties may be void by the court. To minimise the risk of having an agreement set aside, parties should be transparent in their dealings and properly disclose their assets and financial resources. There are many other circumstances could prove that one of the parties to the agreement engaged in fraudulent conduct.

Agreements made to defeat creditors or third parties

A Financial Agreement made with disregard to the interests of a party’s creditors or to defeat or defraud the interests of the other party or a person with whom one of the parties had pending property matters, may be set aside by a court.

Material changes in a party’s circumstances

A material change in circumstances that creates hardship for a party, or affects the welfare of a child of the relationship may be grounds for a Financial Agreement to be set aside. Similarly, circumstances that make it impracticable to carry out all or part of the agreement may invalidate it, for example, a person’s bankruptcy, or an illness or injury that permanently affects a party’s earning capacity.

Agreements that are void, voidable or unenforceable under contract law

A Financial Agreement may be set aside under general principles of contract law, such as uncertainty, duress, undue influence, unconscionability, misrepresentation, mistake, and incapacity. Many disputes over the validity of a Financial Agreement involve allegations of undue influence or unconscionability, and there are many cases showing how these matters are determined by a court.

When should I make a Financial Agreement?

Any couple may enter a Financial Agreement. Most commonly parties who have previously been married or in a long-standing relationship, have children from a prior relationship, or who bring unequal financial contributions to the partnership, might consider the potential benefits of a Financial Agreement. In these cases, the agreement is usually structured to protect existing assets or anticipated inheritances, or to take into account the impact of unequal contributions.

There is no ‘one-size-fits-all’ solution to what is often, a sensitive issue, particularly when starting a new relationship. Seeking advice from a family law expert will ensure you enter a Financial Agreement that is appropriate to your relationship and circumstances, and that you fully understand the advantages and disadvantages of the arrangements should your relationship end.

We can assist you with the proper preparation and implementation of a Financial Agreement to ensure the financial protection and security you need.

If you need any assistance, contact one of our North Sydney family lawyers at [email protected] or call 02 8075 0141 for a no-obligation discussion and for expert family law advice.