Consent Orders vs. Binding Financial Agreements: Which is Best?

Consent orders and binding financial agreements are legal terms for documents that outline how assets will be divided.

When a marriage ends, or a relationship breaks down, dividing assets and deciding on a plan to care for children can be challenging. Creating a binding financial agreement or applying for consent orders are the two main legal pathways in Australia to do so, both recognised under the Australian Family Law Act for property settlement.

But what’s the difference between the two? What do the two terms mean? And which is best for your circumstances? We’ll look at the purpose, process, and key differences between the two in this article.

What are consent orders?

A consent order formalises an agreement made out of court when a marriage or de facto relationship ends. You and your former partner will set out proposed consent orders around parenting, finances, property, and spousal maintenance. This can be done by private discussion, in family mediation, or with the assistance of a family lawyer.

Consent orders are typically prepared by a family law expert after the relationship or marriage ends. They can also be used to change existing family law orders if circumstances have significantly changed.

Consent orders are:

• Legally binding, which means the court will enforce them if either party defaults on agreements
• Able to be made without attending a court hearing unless parties cannot reach an agreement
• Rarely overturned in court, but can be updated if this is necessary
• Able to be made on an interim (temporary) and/or final (permanent) basis

Consent orders can:

• Cover financial orders for dividing assets like your family home and superannuation
• Formalise parenting arrangements, which BFA’s can not do, into consent orders
• Include both parenting and financial agreements in one document
• Be made with or without legal advice – although it’s very wise to get legal advice before signing anything
• Include orders for spousal maintenance for the other party
• Result in legal penalties for non-disclosure or breaches of orders

Consent orders cannot:

• Cover child maintenance (child support) if the child is covered by the Child Support Act
• Cater to highly specific or unique agreements due to the format of orders
• Be made without an application to the court, which can take some time depending on how many matters are being heard

Consent orders must be:

• Approved by the Federal Circuit & Family Court Of Australia
• Formatted in a specific way for court orders to be granted
• Deemed just & equitable (i.e., fair to both parties involved), which the court reviews on application
• Made with full and frank disclosure by both parties regarding financial resources

Consent orders must be just and equitable

To obtain consent orders, the court must approve that they are a fair and equitable way to end your financial relationship. The court has the discretion to make orders it deems appropriate, ensuring they are just, fair and equitable for all involved.

You can read more about the consent order process and the criteria the court looks at for consent orders here.

What is the process for obtaining a consent order?

To make a consent order,  you’ll need to agree with your ex-partner on all relevant matters, write it down in the proper format, and then apply to the court to formalise the proposed orders and make them legally binding.

While it’s possible to prepare a consent order yourself, it’s usually best to seek legal advice from a family lawyer who can make sure you understand the content of the order and help you fill out forms and lodge documents. 

A good lawyer will also ensure that the agreement reflects the best interests of both you and your children if you have them. It’s also possible to have one family law solicitor draw up the agreement for both parties, and then each signs them.

It’s important to understand that a family lawyer can only provide individual legal advice to one party, though, to avoid a conflict of interests. If you have any doubts about a consent order that you are asked to sign, it’s vital to speak to a family lawyer.

In summary, a consent order is generally a quick, easy and affordable way to form a legally binding agreement on property division and parenting after a breakup or divorce – as long as both parties can reach an agreement. It can be prepared by you or a lawyer and made into a formal agreement by the court.

What are binding financial agreements?

Binding Financial Agreements (BFAs) are legally enforceable contracts that couples can enter into before, during, or after a relationship. These agreements outline how assets, property, and financial matters will be divided in the event of separation, divorce, or the breakdown of a de facto relationship. They can also address ongoing other financial matters, maintenance and provisions for children, ensuring clarity and fairness for all parties involved.

Unlike consent orders, BFAs are private contracts entered into by parties without court approval or involvement. They require both parties to obtain independent legal advice before signing, ensuring that each party understands its rights, obligations, and implications. BFAs can be made before, during, or after a marriage or de facto relationship.

Binding Financial Agreements (BFAs) are:

• More frequently challenged in court, especially when one party feels the terms are unfair or not correctly followed.
• Private agreements, not part of the public record, ensure confidentiality between the parties.
• Legally binding only if both parties follow the correct process and have received independent legal advice.
• Not automatically enforceable if the terms are deemed unjust or if there has been fraud or duress.

Binding Financial Agreements (BFAs) can:

• Be made at any stage of the relationship, including before, during, or after marriage or de facto relationships.
• Be overturned if the legal process is not followed precisely or if independent legal advice isn’t provided.
• Address property division and financial maintenance during a relationship breakdown.
• Be negotiated and updated if both parties agree to modify the terms in writing.

Binding Financial Agreements (BFAs) cannot:

• Be enforced if both parties do not receive independent legal advice before signing.
• Be relied upon if either party was coerced or signed under duress.
• Address issues outside the scope of the agreement, such as parenting matters or child support, which require separate legal proceedings.
• Be enforced if they are deemed unfair or unreasonable by the court.

Binding Financial Agreements (BFAs) must:

• Be correctly drafted by a qualified legal professional to ensure validity and enforceability.
• Be signed by both parties with a clear understanding of their rights and obligations.
• Be executed with the independent legal advice requirement fulfilled for both parties.
• Clearly outline the division of assets and liabilities in the event of separation or divorce.

What types of binding financial agreements are used in Australian family law?

Here’s a concise list of the types of Binding Financial Agreements (BFAs) and their alternate names in Australia:

• Prenuptial Agreements: Marriage Agreement, Pre-marriage Agreement, Prenuptial Contract, Prenup
• Cohabitation Agreements: De Facto Agreement, Domestic Partnership Agreement, Cohabitation Contract, Living Together Agreement
• Postnuptial Agreements: Post-marriage Agreement, Post-marital Agreement, Postnuptial Contract, Postnup
• Separation Agreements: Used during or after separation to detail asset division
• De Facto Agreements: Often interchangeable with Cohabitation Agreements for unmarried couples

What is the process for getting a Binding Financial Agreement?

Here are the key steps to obtain a Binding Financial Agreement (BFA):

• Assess financial circumstances by reviewing assets, liabilities, and income of both parties.
• Seek independent legal advice, as both parties must receive separate legal counsel.
• Draft the agreement with a lawyer who outlines the financial arrangements.
• Sign the agreement in the presence of each party’s lawyer.
• Obtain court approval if necessary, in limited circumstances or for complex matters.
• Finalise the agreement, making it legally binding once signed and properly completed.

Independent legal advice – a must for BFAs

Independent legal advice is a crucial requirement for binding financial agreements (BFAs). Both parties must seek individual legal counsel to ensure they fully understand the agreement’s implications. Without this advice, the agreement will not be enforceable in court. Each person’s lawyer should prepare a statement confirming they provided advice. 

Binding financial agreements are legally enforceable by the courts in most cases unless it’s proven that there was fraud, that the agreement is unfair to one party, that there’s been a major change in the circumstances of one party or if the court orders that one party has failed to comply with an obligation under the agreement.

The agreement can also be disregarded if it’s proven that it was signed under duress (for example, if one party threatened not to go through with a marriage unless the agreement was signed). Binding Financial Agreements can also be set aside if both parties did not receive independent legal advice prior to entering into the agreement.

Choosing the right option for your situation

The decision between consent orders and a BFA depends on various factors, including your individual circumstances, the complexity of your financial situation, the level of agreement between parties, and your desire for court involvement. If you have reached a clear agreement with your former partner and seek court approval for added security, consent orders may be the preferred option. On the other hand, if you value privacy and wish to retain more control over the terms of the agreement, a BFA could be more suitable.

Get advice about what is right for you from an experienced family lawyer

Whether you need general advice about your family law matter or are trying to decide between a consent order or a binding financial agreement – it’s always best to get honest, impartial advice from a knowledgeable family lawyer before preparing legal documents.

The friendly, experienced team at Testart Family Lawyers has years of experience preparing and advising on consent orders and BFAs and will ensure you’re aware of the legal requirements involved with both options.

To begin the process of preparing your own BFA or consent order, enquire now, and we’ll arrange a free consultation.