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31 Mar 2020

HHG Legal Group’s Family Law Special Counsel, Ben Majoe and Executive Chairman Simon Creek provide clarity in relation to current binding financial arrangements and the coronavirus pandemic.

20200331 in article bfa

A ‘black swan’ event is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences.  Black swan events are characterised by their extreme rarity, their severe impact and the widespread insistence they were obvious in hindsight. 

 

In the mid-2000s a Lebanese-American university scholar, Nassim Taleb, lectured on black swan events where he advocated what he called a “black swan robust” society, meaning a society that can withstand difficult-to-predict events.

While it is still too early to say whether the COVID-19 pandemic was obvious in hindsight, there can be no doubt that the global economic damage being wrecked by the COVID-19 pandemic is equivalent to a black swan event.

Financial agreements and ‘black swan’ events

When we advise our clients about Binding Financial Agreements, we point out that we cannot predict the future, including black swan events, which may affect either the validity of these Agreements or the implementation of them, following separation.

Our Financial Agreements generally provide that they remain enforceable as private contracts notwithstanding any increase or decrease in the value of assets.  We call this our “vicissitudes of life” clause similar to a “black swan events” clause.

If such a clause is in place, we consider it gives the parties some measure of confidence that the economic impact of a black swan event does not give either party a basis to set aside the Binding Financial Agreement.

The importance of regular reviews

However, this is not to say that you should not review a Binding Financial Agreement from time to time.  Much like a Will, a Financial Agreement is a living document which may need to be amended as circumstances change.

If the economic impact of the COVID-19 pandemic means that you may not be able to discharge your contraction obligations under the terms of a Binding Financial Agreement, you may need to think about entering into a new one which takes into account your current financial circumstances.

Can a financial agreement be terminated?

The law does allow for an existing  Binding Financial Agreement to be terminated if it is done in writing and each party receives legal advice before signing the Termination Agreement.

Want to know more?

HHG Legal Group has previously published an insightful FAQ article relating to Binding Financial Arrangements.

HHG Legal Group can assist

If you have any queries relating your current financial agreement or wish to get one in place, please contact HHG Legal Group’s team on 1800 609 945 or send us an email here and we will get back to you.

*This is general information only, and does not constitute specific legal advice. Please consult one of our experienced Legal Team for specific advice relevant to your situation.

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