×

We’ve noticed that you’re using an unsupported browser,
which may result in pages displaying incorrectly.

For a better viewing experience, we recommend upgrading to the latest browser version of:

Skip to main content
Are you in QLD?

Please select your location to view information that is specific to you.

Menu
Call Call 1800 555 777
1800 555 777
or let us call you

Let Us Call You

Close

Settling property and financial matters: informal agreements are not legally binding

in Family Law by Heather McKinnon on

There are only two ways to get matters resolved when a relationship breaks down – by negotiated settlement or through the court process.

When a relationship breaks down, a negotiated settlement that both parties can live with can save time, money and stress.

Negotiated settlement

A negotiated settlement means that both parties determine the terms of the agreement, with or without legal or other professional help (such as mediators). That agreement should then be converted into a document that is legally binding. Settling will be quicker, easier and cheaper for both parties and probably get them more of what they want than a court decision would.

An agreement can be reached – in writing or not – and it is left at that. This is known as an ‘informal agreement’. It can be witnessed by the local Justice of the Peace or can simply be a verbal understanding about how the settlement will occur. However, an informal agreement is not binding on the parties and is not legally enforceable.

Whether the agreement will work depends entirely on the continuing good faith of both parties. If one party concludes that they don’t like the agreement and decides to take it to court, the informal agreement is nothing more than evidence of intention at the time it was made.

When an agreement has not been properly formalised, it is very important to note that either party can seek to have entirely new arrangements made at some later date by applying to the court.

Unfortunately, many people have been stung in thinking that the out-of-court settlement they negotiated with their former partner was legally binding and finalised financial matters between them forever.

The Court process

There are two ways to enter into a legally enforceable property settlement with an ex-partner:

  1. by way of Consent Orders in the Family Court or
  2. by way of a Financial Agreement.

Consent Orders are agreements made between separated or divorced couples that have been registered in and accepted by the Family or Federal Magistrates Court. These agreements may include the following issues:

  • property & financial settlement
  • spousal maintenance
  • division of Superannuation
  • children's issues.

Once they are formalised by the courts, Consent Orders become a final and enforceable contract between both parties. Where only financial matters are involved, the settlement can be written up as a Financial Agreement and signed by all parties and their lawyers to become final and enforceable. If a party wants a Financial Agreement, both must get independent legal advice and certification and there are many technical rules about how these Agreements must be made.

Once an agreement has been reached, both parties should consult a lawyer for advice on the best way to ensure the agreement is binding. While there will be a cost involved for this advice, the peace of mind of knowing everything has been finally and legally resolved is worth the price.

It is possible to lodge Consent Orders with the Family Court directly. Neither party is required to attend court; the document simply needs to be filed with the court registry after signing by both parties. The court will then review the orders and satisfy itself that the terms of the agreement are ‘fair and reasonable’ and otherwise appropriate. In other words, the order will have to comply with the requirements of Family Law.

If both parties have complied with the legal requirements to prepare the forms and the court is satisfied with the terms proposed, it will issue final Consent Orders. This amounts to a legally binding contract between the parties that is enforceable in the court if either party fails to comply with the terms.

Family Court do-it-yourself settlement kits are available from the Family Court of Australia website. However, when using these kits it is important to follow the steps exactly. Also, complex orders that are impractical or impossible to implement should not be submitted in this way as it is likely both parties will end up in court to sort them out in the future.

That is why, unless both parties are seeking very simple and straightforward orders, it is certainly quicker, safer and probably a lot less expensive in the long term to use a good lawyer to draw up documents and obtain the consent orders that you need.

To find out more about informal agreements, consent orders and financial agreements, contact our Family Lawyers and ask to speak to a specialist family lawyer in your local office.

Have your say