When asked to pay a deposit, we are often told that deposits are non- refundable. Is this true? Does the law protect us? What precautions can we take to safeguard our money and avoid losing deposits?
It is always in our best interest to pay the least amount of deposit possible
As consumers, we may find ourselves in various situations where we are asked to pay a deposit, such as when we order something from a shop or when engaging someone to carry out work for us, such as construction, or when booking a holiday.
A paid deposit means that there is a commitment by the buyer to continue with the purchase and pay in full when the product or service is delivered, and also a commitment by the seller to provide the product or service ordered.
Even though verbal commitments are binding, when sales contracts are concluded it is better to have them in writing. As the ones forking out the money, we must first of all agree with the seller on the amount to be paid and also how the rest of the payment will be made. We should also make sure that the agreed delivery date, or the date when the service will be provided, is clearly written on the contract of sale.
What happens if we change our mind? Is it true that we risk losing the deposit paid?
Yes, unless otherwise stated in the contract of sale, we not only risk losing the deposit, but the seller may argue that a product was specifically ordered for us, or in case of booking of services, a specific date booked for us, and may insist we abide by the contract of sale and continue with the purchase.
To avoid change-of-mind situations, it is advisable to shop around before paying any deposits.
In cases of products we won’t be using for a while, there is no need to order them years before.
New models may be created that will provide us with a wider range of products to choose from. There is also the possibility that our circumstances may change and hence our needs may change too.
If it is the trader who breaks the sales agreement and therefore fails to provide us with the product or service ordered, we are legally entitled to claim a refund of the deposit. We may also claim compensation for any extra expenses incurred due to the trader’s failure to complete the sale.
We can also claim back deposits when it is stipulated in the contract of sale that deposits are refundable. Such clauses are quite unusual but we can try to negotiate the inclusion of such a condition.
We are also entitled to a refund of payments made when a product or service is ordered through a distant means of communication, such as by telephone, through mail order or via the internet, and also when sales contracts are concluded with doorstep sellers.
In both situations, the law entitles us to a 15-day cooling-off period during which we can change our mind, cancel the sale and get a refund.
We are often doubtful about the amount of money we should leave as deposit. Such amount is not regulated by any law and must therefore be agreed by supplier and consumer. It is, however, common practice for the seller to suggest the amount to bepaid. If we think the proposed downpayment is too high compared with the total price, we should renegotiate another amount.
It is always in our best interest to pay the least amount of deposit possible. We must keep in mind that we are paying money for something that is still not ours and hence various problems can crop up before we actually receive the product ordered or start using the service.
One of the worst possible scenarios is when the seller goes out of business. If this happens, we may have considerable difficulty in getting either the goods or our money back.
Usually the seller, in these circumstances, owes money to a number of people, so our claim would be one of many. There are rules for priority to be given to the various debts in the case of a business going into liquidation, and generally the individual consumer is low on the list.
There could also be problems with the actual order, such as a different product being delivered or arriving with missing components. As consumers, we should bear in mind that when such situations occur, our strength very often depends on how much money we still owe the trader.
Therefore, my advice is to hold on to your money until what you have ordered is delivered and carefully checked out.
odette.vella@mccaa.org.mt
Odette Vella is senior information officer, Office for Consumer Affairs, Malta Competition and Consumer Affairs Authority.