What is Termination of Financial Agreement?

This article will discuss Sections 90UK to 90UN of the Family Law Act 1975, which stipulate rules for the validity and enforceability of termination agreements and the circumstances when the court may set aside such agreements. A termination agreement under the Family Law Act terminates any previous agreement entered into by parties.

The Act provides rules on the financial agreements between married couples, those planning to marry, or in a de facto relationship. Parties can make these agreements before, during, or after the relationship. It can cover a range of financial matters including property, spousal maintenance, and financial resources.

Section 90UL: Termination of Financial Agreement

Section 90UL provides ways that the parties of a de facto relationship may terminate their financial agreement. These ways are:

• Including a provision in a new financial agreement provided that all parties to the previous agreement are parties to the new agreement (Section 90UB(4), 90UC(4), and 90UD(4)).
• Making a written agreement to that effect.

When Is a Termination Agreement Binding?

This Section also provides the conditions for this agreement to be binding:

1. If all parties to the financial agreement sign the termination agreement;
2. Before signing the termination agreement, a legal practitioner provides each spouse party of the termination agreement with a piece of independent legal advice about the effect of the termination agreement on the rights of that party and the advantages and disadvantages of such;
3. Either before or after signing the agreement, each party acquires a signed statement by the legal practitioner stating that a legal practitioner provided legal advice to the parties;
4. The other spouse party acquires a copy of the signed statement; and
5. A court has not set aside the termination agreement.

Moreover, the court may make an order declaring that the termination agreement is binding upon the parties upon application by a party of an enforcement application. A party to the financial agreement or any interested person applies for an enforcement application, and the court may make such an order as it considers just and equitable in preserving their rights. 

Section 90UM: Circumstances in Which the Court May Set Aside a Financial or Termination Agreements

This Section provides for the circumstances in which the court may set aside a financial or termination agreement. These include if:

1. The agreement was obtained by fraud, including non-disclosure of a material matter; or
2. The agreement aims to defraud or recklessly disregard the interest of a party’s creditor or creditors.
3. A party to the agreement entered into the agreement:
   • To defraud another person who is a party to the other de facto relationship with a spouse party; or
   • To recklessly disregard or defeat the interest of that other person in relation to any pending or possible Section 90SM order or a Section 90SL declaration in relation to the other de facto relationship; or
   • To defraud another person who is a party to a marriage with a spouse party; or
   • To recklessly disregard or defeat the interest of that other person in relation to any possible or pending application under Section 79 order or a Section 78 declaration in relation to the marriage or void marriage.
4. The agreement is void, voidable, or unenforceable.
5. The parties cannot carry out the agreement because it is impracticable due to the circumstances that have occurred since the agreement was made.
6. There has been a significant change in agreement such as those relating to the care, welfare, or development of a child of the de facto relationship. Because of this change, the child or, if the applicant has caring responsibility for the child, a party to the agreement will face hardship if the court doesn’t set aside the agreement.
7. A party to the agreement engaged in conduct that was unconscionable in all circumstances.
8. A payment flag is operating on a superannuation interests covered by the agreement.
9. The agreement covers at least one superannuation interest that is an unsplittable interest.
10. The agreement is covered by Section 90UE.

Section 90UN: Validity, enforceability, and effect of financial and termination agreements

According to Section 90UN, the court will determine whether the agreement is valid, enforceable, or effective according to the applicable principles of law and equity.

The court has the following powers:

1. To grant remedies and pay the same regard to the rights of third parties as the High Court does in cases involving contracts or supposed contracts, where the High Court has original jurisdiction.
2. To order one party to the agreement to pay another party interest on an amount due under the agreement, starting from when the amount became or becomes due and payable, at a rate not higher than what is set by the Rules of Court.
3. To order that enforcement of the agreement or a specified part thereof as if it were an order of the court.

Section 90UK: Effect of Death of a Party to a Financial Agreement

This Section illustrates the rules when a party to the financial agreement dies. 

• The financial agreement must be binding on the parties to the agreement.
• The agreement continues to operate despite the death of a party to the agreement.
• The agreement operates in favour of and is binding on that party’s legal personal representative.
• If the parties are still in the de facto relationship when one dies, the de facto relationship will persist to enforce the matters mentioned in the financial agreement.

Financial agreements under the Family Law Act 1975 in Australia allow couples to regulate their financial affairs before, during, and after the relationship. These agreements can benefit both parties by providing certainty and clarity if the relationship breaks. However, seeking legal advice before entering into any financial agreement or terminating it is essential to ensure that it is fair and reasonable for both parties.

Legal Assistance on Termination Agreements

If the parties in a financial agreement wish to terminate it by mutual consent, lawyers can help them draft a termination agreement. This document outlines the terms and conditions of the termination and ensures that both parties know their legal rights and obligations. Lawyers can represent their clients in court proceedings if the parties cannot agree on terminating the financial agreement. 

Our team of skilled family lawyers at JB Solicitors can help you understand your legal rights and obligations and provide valuable advice on the best course of action. Our solicitors can also represent you in court proceedings if necessary. By seeking the assistance of a lawyer, parties can ensure that their rights are protected and that the termination of the financial agreement is legally valid and binding.

Contact us.