Family Law

Common Reasons Financial Agreements Are Challenged in Court

Financial agreements are an essential part of family law, offering clarity and security to couples regarding asset division, financial obligations, and other related matters. However, as MBA Lawyers’ family law expert Aleena Mills explains, these agreements are “not without risk” and can be challenged in court under certain circumstances. Understanding the common reasons why financial agreements are disputed can help individuals take the necessary precautions to ensure their agreements stand the test of time.

Lack of Full Financial Disclosure

One of the primary reasons financial agreements are challenged is due to inadequate disclosure of assets. As Aleena Mills states, “It’s really important to be transparent and honest in those agreements, especially about the value of things and the extent of your assets.” If one party fails to disclose their full financial position—whether intentionally or inadvertently—the other party may later challenge the agreement, arguing that they would not have signed it had they known the true extent of the financial situation.

Duress or Undue Influence

Financial agreements should be entered into freely and without coercion. If one party is pressured into signing—whether through emotional manipulation, financial threats, or time constraints—a court may set aside the agreement. Aleena Mills references a high-profile case where a woman was presented with a financial agreement just before her wedding and was pressured into signing. The court found that that was unconscionable conduct and set the agreement aside. This highlights the importance of both parties having ample time and freedom to consider the agreement before signing.

Unfair or Unconscionable Terms

While financial agreements do not necessarily have to be perfectly equal, they should not be grossly unfair to one party. Courts may intervene if an agreement is deemed to be unjust or if it disproportionately benefits one party over the other. “Make it as fair as possible,” Mills advises. “Make it as equitable as possible to avoid it being challenged by the disadvantaged party down the track.” Agreements that fail to provide for a party’s future needs—especially when children are involved—are more susceptible to being overturned.

Failure to Meet Legal Requirements

For a financial agreement to be legally binding, it must meet certain requirements under family law legislation. Both parties must receive independent legal advice before signing, and the agreement must be properly drafted and executed. “We used to call them ‘binding financial agreements,’ but we don’t use that term anymore because they’re not necessarily binding,” Mills clarifies. This shift underscores the importance of ensuring compliance with all legal formalities to avoid potential challenges.

Significant Changes in Circumstances

Life is unpredictable, and significant changes—such as illness, loss of employment, or the birth of children—can impact the fairness of a financial agreement. If an agreement no longer reflects the reality of the parties’ circumstances, a court may decide to set it aside. Mills notes that this is especially relevant for younger couples. “I would strongly recommend younger couples where kids are on the cards really consider that,” she says. Reviewing and updating agreements periodically can help mitigate the risk of future disputes.

Improper Execution or Fraud

If a financial agreement is not signed correctly or contains fraudulent elements, it may be challenged in court. Both parties must fully understand the terms they are agreeing to, and any attempts to mislead or misrepresent facts can render the agreement invalid. As MBA Lawyers advises, working with experienced legal professionals ensures that agreements are executed correctly and in compliance with legal standards.

How to Protect Your Financial Agreement

While financial agreements can provide much-needed certainty, they require careful preparation and execution. To minimise the risk of a legal challenge, MBA Lawyers recommends:

• Full Financial Disclosure: Ensure that all assets and liabilities are transparently disclosed.
• Independent Legal Advice: Both parties should seek separate legal counsel before signing.
• Sufficient Time for Review: Avoid last-minute agreements that could be construed as coercive.
• Fair and Reasonable Terms: Strive for an agreement that is equitable and considers both parties’ needs.
• Periodic Review: Update the agreement as circumstances change over time.

By taking these precautions, couples can improve the enforceability of their financial agreements and avoid costly legal disputes in the future. As Aleena Mills puts it, “A financial agreement is like an insurance policy on your relationship—it’s there to provide certainty, but it must be done properly to be effective.”

For expert guidance on drafting and reviewing financial agreements, MBA Lawyers is here to help. Whether you’re based in Gold Coast or Brisbane, Australia, our family law team can ensure your agreement meets all legal requirements and protects your interests effectively.

For more information on family law matters and to speak with an expert, contact MBA Lawyers today.