A binding financial agreement (BFA) is a binding and enforceable contract between the parties, subject both to rules of contract and the strict terms of the Family Law Act that allows for BFAs. It can only deal with financial or property matters. A BFA can be entered into at any time during a relationship such as before living together, during cohabitation, during a marriage, after separation, or after divorce.
Advantages of a Binding Financial Agreement
- Drafting a BFA is at the discretion of the parties and is therefore more time efficient.
- The parties can divide the assets in a manner which suits them and the agreement can still be binding (as long as both parties receive independent legal advice in relation to the BFA). In contrast, Consent Orders will be considered by the Court and orders made where the court determines the split and just and equitable.
- Can be entered into at any time during a relationship (before living together, during cohabitation, during a marriage, after separation, or after divorce).
Disadvantages of a Binding Financial Agreement
- Both parties must obtain their own independent legal advice and be provided a solicitors certificate of the advice given. Their solicitor must clearly explain the advantages and disadvantages of the party signing the Binding Financial Agreement. Failure to obtain such advice will almost certainly mean that the BFA is unenforceable.
- A BFA can be found to be unenforceable if poorly drafted or if it was entered into under duress.
- Any ambiguous terms can be interpreted to favour the party that did not draft the BFA.
- An application to the Court to enforce a BFA is more complicated as the Court will need to determine that the BFA is both valid and enforceable.
- Unlike a court order, a BFA will not provide a final solution or certainty until it is considered and endorsed by the court.
The costs in properly drafting a BFA and its advice is significant, although, this must be considered in the context of the value of the overall assets.
