Financial agreements and internet templates – can’t I do it on the cheap?

Introduction

No family law client wants to spend more on legal costs than necessary. In a bid to minimise fees, our family lawyers are often confronted with clients downloading a template financial agreement from the internet for a small fee. The client pushes for the lawyer to use the template document to prepare their financial agreement because – what could go wrong?

In our experience, such template documents frequently contain significant technical errors that, alone, could be fatal to the enforceability of the document. Further, templates generally contain limited detail and are well below the standard produced by a competent family lawyer. There are various ways a party can apply to set aside a financial agreement, including non‑disclosure of material information or incompleteness. Trying to reduce your lawyer’s drafting time by using a sub‑standard template may end up costing you significantly more money either in the time taken to:

• correct the deficiencies in the document
• renegotiate your property settlement if the agreement is not binding.

What is a financial agreement?

A financial agreement is essentially a contract that determines how some, or all, of the property, liabilities and superannuation of the parties will be dealt with if they separate. You will sometimes see it referred to as a binding financial agreement, a pre-nuptial agreement or a pre-nup. A financial agreement may also address the issue of spousal maintenance, requiring one party to financially support the other. This occurs when one party is unable to support themselves adequately, and the other party has the capacity to pay.

A financial agreement may be entered into at any stage of the relationship spectrum – whether couples are:

• contemplating living together
• already living together
• contemplating marrying
• already married
• separated.

What are the requirements of a financial agreement?

For a financial agreement to be binding on the parties, the following conditions must be met:

• The financial agreement must be signed by both parties.
• Before signing the financial agreement, each party must be provided with independent legal advice about the effect of the agreement on the rights of that party and the advantages and disadvantages of making the agreement.
• Either before or after signing the agreement, each party must be provided with a statement signed by their lawyer certifying that the advice was provided.
• A copy of the statement confirming the legal advice must be provided to the other party or their representative.

These criteria have been interpreted to also require that the parties provide full and frank disclosure of all material matters. This includes details of the parties’ financial holdings.

The requirements of a financial agreement are considerably more onerous than most other contracts. It is not a straightforward legal document and overlooking any of the mandatory requirements could be fatal to the enforceability of the agreement.

What is wrong with an internet template financial agreement?

In our experience, there are several problems with internet template agreements.

First, they often contain incorrect references to the various sections of the Act and are rarely updated to reflect changes in legislation. As explained below, either error could result in serious unintended consequences.

Second, as they are general templates, they do not contain sufficient detail to explain the background and purpose of the document. Your financial agreement should have enough detail that a third party reading it can understand why the parties are entering the document e.g. because one party comes from a family of substantial wealth and the purpose of the agreement is to protect that wealth for future generations. A lack of context could mean that a third party, including a judge tasked with interpreting the agreement, may overlook important features.

Third, general templates cannot address all the unique permutations your financial agreement may require. For instance, if the parties have assets in Australia and overseas, is the agreement intended to be read in conjunction with the terms of an overseas agreement?

Correcting the above deficiencies in a template can take a substantial amount of time. It is typically a larger job to fix a poorly drafted financial agreement than it is to draft the document properly in the first place. Therefore, the idea that you will save money by using a cheap internet template is illusory.

What are the risks of entering a poorly drafted financial agreement?

Using a poorly drafted financial agreement may mean that the document is set aside by a court, making the document worthless; or you may be stuck with its terms, creating unintended outcomes.

A party seeking not to be bound by the terms of their financial agreement may apply to set it aside. The Act contains a list of grounds entitling a party to make that application including, in general terms, that the agreement:

• did not disclose a material matter – this applies where a duty of disclosure exists, for example, disclosure of a party’s financial position, and non-disclosure occurs
• may be void, voidable or unenforceable because it is incomplete and a critical term has been mistakenly left out.

An additional concern is that a financial agreement may be held to be binding, even where poor drafting results in a wildly different outcome than intended by the parties. It may be impossible to correct any drafting errors once an agreement is signed.

If you have any questions about financial agreements, please do not hesitate to contact one of our experienced family lawyers.