Financial stress is one of the first things separating couples face. Who keeps the house? Who covers the debt? What happens next?
Understanding your options early
A binding financial agreement can answer these questions clearly -before a court gets involved. However, many of these agreements get thrown out. They fail due to rushed timelines, poor disclosure, or poor drafting. So before you sign anything, you need to understand how a financially binding agreement actually works -and what can go wrong.
Quick answer: What must a binding financial agreement include?
✔ Compliance with the Family Law Act 1975
✔ Full financial disclosure from both parties
✔ Independent legal advice for each person
✔ Voluntary signing -no pressure or duress
✔ Clear, unambiguous drafting
Miss any of these and a court can set the agreement aside.
What is a binding financial agreement?
A binding financial agreement is a private legal contract that sets out how a couple’s money and property will be divided. Under the Family Law Act 1975, you can sign a BFA at one of these three stages:
- Before the relationship, often called a prenuptial agreement
- During the relationship
- After separation
The goal is to avoid court. However, that only works when the agreement meets strict legal standards.
Why are these agreements challenged?
Courts do not simply check whether a document exists. Instead, they look at how it was made, whether both people understood it, and whether the process was fair.
This is why you need prenuptial agreement lawyers involved from the beginning – not at the end or as an afterthought.
The High Court case Thorne v Kennedy is a clear example. In that case, both parties signed the agreement, yet the court set it aside because the circumstances showed that genuine consent was lacking. The signature is not enough on its own.
Legal compliance is not optional
To remain enforceable, a financially binding agreement must comply precisely with the Family Law Act 1975. Before signing, both parties must receive independent legal advice before signing, and each lawyer must provide a signed statement confirming that advice was given.
Without that documentation, the agreement is unenforceable – regardless of what it says.
Experienced prenuptial agreement lawyers do more than witness a signature. They explain the agreement in plain terms, identify risks, and produce documentation that protects the agreement’s long-term validity.
Full financial disclosure is essential
A financially binding agreement can only work if both parties are honest about their finances. Specifically, that means disclosing all assets, liabilities, income, superannuation, and other resources – in full.
Incomplete disclosure is one of the most common reasons courts set agreements aside. In Black v Black, the court emphasised this directly: where disclosure falls short, the agreement is built on shaky ground.
Trying to speed up the process by skipping disclosure does not save time. In fact, it creates significant risk.
Timing matters more than most people realise
When you enter into a binding financial agreement affects how courts view it. Agreements signed quickly — near a wedding, during separation, or under emotional pressure – face much closer scrutiny.
In practice, courts ask three key questions:
- Did each person have enough time to consider the agreement?
- Was the legal advice meaningful or rushed?
- Did either party feel they had no real choice?
Thorne v Kennedy shows what happens when these questions have bad answers. The court set the agreement aside because time pressure and unequal bargaining power made it unconscionable.
The takeaway: start early, allow proper time, and work with prenuptial agreement lawyers who know how to run this process correctly.
Think about the future, not just today
Binding financial agreements do not need to match what a court would order. Nevertheless, they must not produce a grossly unfair result either. More importantly, a good agreement plans ahead.
Circumstances change over time. Children arrive, incomes shift, and health problems emerge. Consequently, an agreement that only reflects the current situation – and ignores what might come – is far easier to challenge later.
Poor drafting is a hidden danger
Even a well-intentioned, financially binding agreement can fail because of how it is written. Vague language, missing definitions, and gaps in coverage all create room for dispute.
This is another reason why experienced prenuptial agreement lawyers add real value. Rather than simply producing a document, they anticipate problems and close the gaps before the agreement is signed. A well-drafted agreement is built to last, whereas a poorly prepared one invites the very conflict it was supposed to prevent.
A real-world example
In one Sydney matter, a couple entered into a financially binding agreement shortly after separating. One party held far more assets but provided only limited financial disclosure. The agreement was signed quickly, leaving little time for proper legal advice.
Later, the disadvantaged party challenged the agreement in court. The court found that incomplete disclosure and surrounding pressure had undermined its validity, and consequently set the agreement aside.
With proper disclosure and experienced prenuptial agreement lawyers guiding the process, the outcome could have been very different.
Frequently asked questions
What makes a financially binding agreement valid in NSW? It must comply with the Family Law Act 1975, include independent legal advice for both parties (properly documented), and involve full financial disclosure from each person.
Can binding financial agreements be overturned? Yes. Indeed, courts can set them aside for duress, non-disclosure, unconscionability, or failure to meet legislative requirements.
Do both parties need their own lawyers? Yes. Independent legal advice for each party is a legal requirement — not a suggestion. Without it, the agreement has no force.
Are these agreements only for wealthy couples? No. A binding financial agreement is relevant for any couple with assets, liabilities, or financial risk to manage.
When is the best time to start the process? As early as possible. Agreements made well before major life events hold up far better than those signed under pressure or in a hurry.
Speak With an Experienced Sydney Family Lawyer
Money conversations are rarely easy — especially when they’re tied to love, separation, or an uncertain future. A binding financial agreement can bring real clarity to those conversations: protecting what you’ve built, reducing the risk of future conflict, and giving both parties a clear path forward.
Their effectiveness depends entirely on how properly they are prepared. Poorly drafted agreements are regularly challenged — and set aside — by the Court.
We work with clients across Sydney and NSW on:
- prenuptial agreements
- post-separation financial agreements
- property settlement strategy
- consent orders
- complex financial negotiations
Clients work directly with an experienced family lawyer throughout the process. No hand-offs, no junior lawyers running your file — just considered, strategic advice focused on protecting you long-term.
If you’re thinking about a binding financial agreement, or have concerns about one that’s already in place, we’d welcome the chance to talk. All enquiries are confidential.
📞 (02) 7252 0444
🌐 consortfamilylaw.com
📍 North Sydney, servicing clients across Sydney and NSW
This article was prepared by Catherine Heath, Principal of Consort Family Law, a boutique family law practice based in North Sydney.
Catherine has practised in family law for more than 26 years and advises clients in relation to:
- property settlements,
- binding financial agreements,
- parenting disputes,
- and complex financial matters.
She appears in the Federal Circuit and Family Court of Australia and acts for clients throughout Sydney and NSW.
SOURCES AND AUTHORITIES
- Family Law Act 1975 (Cth)
Married Couples (Part VIIIA – Sections 90A to 90KA)
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- s90B: Agreements before marriage (prenuptial).
- s90C: Agreements during marriage (postnuptial).
- s90D: Agreements after divorce.
- s90G: Requirements for a BFA to be binding (e.g., independent legal advice).
- s90K: Circumstances in which a court can set aside a BFA.
De Facto Couples (Part VIIIAB – Division 4)- s90UB: Agreements before a de facto relationship.
- s90UC: Agreements during a de facto relationship.
- s90UD: Agreements after the breakdown of a de facto relationship.
- s90UJ: Requirements for a binding de facto agreement.
- s90UM: Circumstances in which a court can set aside a de facto BFA.
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- Federal Circuit and Family Court of Australia: BFA
