Prior to the commencement of the Family Law Act 1975, parties to a marriage were able to document a financial settlement in a document referred to as a “Deed of Settlement” which had to be approved by a judge exercising jurisdiction under that Matrimonial Causes Act 1971 before the agreement had any force or effect.

After the commencement of the Family Law Act 1975, parties could enter into an agreement pursuant to the then s 86 for financial agreements and s 87 for maintenance agreements, which could then be registered for the purpose of enforcement. However, although the agreements under s 86 were registered, they did not oust the jurisdiction of the court to make orders of a financial nature in the future.

In 2000 Pt VIIIA was inserted into the Family Law Act and s 86 and s 87 agreements were replaced by financial agreements. Specifically, the new part provided for three different types of financial agreements, being:

• a pre-nuptial agreement: s 90B — see Before marriage;

• an agreement entered into during the marriage but before divorce: s 90C — see During marriage and after separation;

• an agreement entered into after divorce: s 90D — see After divorce.

Separating parties are often able to reach an amicable agreement in relation to financial issues including the division of assets and spousal maintenance.

The agreement reached between the parties in relation to financial issues can be evidenced or formalized by way of an application for consent orders which is filed with the Family Court or by way of a financial agreement which is not filed with the court unless it is relied upon for enforcement reasons at a later date.

One of the advantages of a financial agreement is that no documents are filed with the court and, therefore, both parties' financial circumstances remain private and confidential. However, like commencing proceed-ings in the court, both parties have a legal obligation for full and frank disclosure of their financial circum-stances at the time of signing the agreement. Fraud (which includes non-disclosure of a material matter for instance in relation to a party's financial circumstances is one of the grounds to set aside an agreement: s 90K or s 90UM

A financial agreement might be preferable to an application for consent orders where the parties’ financial circumstances are complex (for instance involving entities, trusts and third parties) or where a delayed set-tlement may be more mutually beneficial to one or both parties; instead of a quick “fire sale” property set-tlement which is commonly provided by an application for consent orders. This arises as a result of the Court having a duty to make such orders as “will finally determine the financial relationships” between parties to a marriage, at the time of considering whether to approve the proposed consent orders: s 81 . Further the Court also has a duty to make such orders as will “avoid further proceedings between them”. Whereas a fi-nancial agreement does not require the approval of a court prior to signing by the parties.

Disadvantages of financial agreements are:

• the financial or other circumstances of the parties can change significantly over time. It is diffi-cult to predict what those changes might be. A financial agreement can be inflexible in these circumstances, although clauses can be drafted to increase the flexibility of the clauses to ac-count for changes in circumstances (eg use of formulas and alternative clauses etc);

• the court has shown a willingness to read agreements down: see Black v Black and Kostres v Kostres;

• the court will determine whether it is fair and reasonable: see Thorne v Kennedy 20; and

• there is a potentiality for a legal adviser who does not cover all eventualities to be sued for professional negligence if an agreement proves unsatisfactory or is read down by a court.

A valid binding greement pursuant to ss 90B, 90C or 90D is determinative of a party's rights on marriage breakdown. It may be enforced in a court having jurisdiction under the Family Law Act, or for de facto parties in Western Australia the Family Court Act 1997 (WA), in the same manner as if it were an order of that court.

A financial agreement, unless set aside, continues in operation after the death of the party and is binding on that party’s trustee: see s 90H. The effect of a financial agreement on a party’s ability to claim against the estate of the other party will depend on how that is treated in the relevant law of each State. For example, in NSW a financial agreement does not preclude a party from making a claim under the Succession Act 2006 (NSW). Should the parties wish to preclude any future claims against their estate, the parties will need to seek the approval of the Supreme Court pursuant to the Succession Act for the release of his or her rights to make an application upon the death of the other party. In Victoria, changes to the Administration and Probate Act 1958 (Vic) which commenced in January 2015 provide that a person who is eligible to claim against the estate of the deceased includes a former spouse or domestic partner at the time of the deceased’s death who would have been able to take proceedings under the Family Law Act 1975 (Cth) and has either not taken those proceedings or commenced but not finalised those proceedings and is now prevented from taking or finalising those proceedings because of the death of the deceased. Practitioners should obtain advice from a succession law accredited specialist in their state.

A financial agreement can be in the form of a deed. This is a good idea for the following reasons:

• limitation periods after a breach are longer;

• recitals are enforceable as part of the contract; and

• promises in deeds do not require consideration to be enforceable.

In New South Wales, the period of limitation for commencing an action for a breach under a deed is 12 years rather than six years: ss 16 and 14(1) of the Limitation Act 1969 (NSW).

A financial agreement cannot be varied. If amendments are sought to an existing agreement, a fresh agree-ment must be made by way of a termination agreement of the former agreement and a fresh financial agreement so as to avoid any doubt.

If for any reason both parties no longer wish to be bound by the agreement and wish for it to be terminated, a termination agreement stating that the agreement is no longer in force must be entered into between the parties.

See Termination agreement.