Deposits are normally paid after a sales agreement is concluded with a trader for the provision of goods.  Such agreements are legally binding and consumers are committed to proceed with the purchase by fully paying for the good or service when it is delivered to them. On the other hand, the seller is obliged to provide the product or service ordered at the price and on the date agreed.

What happens to the deposit if the consumer decides to cancel the sale?

In such cases, consumers are seen as breaching the sales agreement and may have to forfeit the deposit paid – unless there is a clause in the contract of sale that gives consumers the right to claim a refund of the deposit paid. If there is no such clause, then it is up to the trader to decide whether or not to refund the deposit.

Out of good will, sometimes traders decide to refund deposits if they have not yet incurred costs and if they think that the circumstances that led consumers to cancel the contract of sale are genuine. However, most traders often decide to keep deposits as compensation for any expenses they incurred in connection with the sales agreement.

When consumers change their mind, they do not only risk losing the deposit but may also be obliged to honour the original sales agreement. This would mean paying in full for the product.

What if it is the seller who is unable to supply the product/service?

Consumers have the right to claim a refund of the deposit paid and other expenses incurred if the seller does not adhere to the original sales agreement, such as, for instance, if the seller is unable to provide the product/service ordered or if the agreed delivery date cannot be honoured. Consumers are also entitled to claim a refund if goods ordered are delivered damaged or do not conform to the original sales agreement.

To prove breach of contract, it is the consumers’ responsibility to submit evidence of the original sales agreement. A verbal agreement is legally binding but with no written details, consumers may find it difficult to prove that they have not received the goods or services they ordered.

Consumers should make sure that the contract of sale is first of all concluded in writing and includes all aspects of the sale agreed upon, such as a detailed description of the product or service, the agreed delivery date, the price and method of payment.

Before committing to a sales agreement, consumers should ask the seller whether it is possible to cancel the order and recuperate the deposit paid. If the seller agrees to this possibility, consumers should ensure that an opt-out clause is included in the contract of sale.

Even though once a sales contract is concluded it becomes legally binding, it is still in the consumers’ best interest to only pay a small amount as a deposit. Usually it is the seller who suggests the amount, but there is no law that makes such a practice a rule. Hence, if consumers think the deposit asked for is not reasonable, they can negotiate a different amount. There could be problems with the goods ordered and in such situations, consumers’ strength will very often depend on how much money they still owe the trader.

odette.vella@mccaa.org.mt

Odette Vella is director, Information, Education and Research Directorate, Office for Consumer Affairs, Malta Competition and Consumer Affairs Authority.

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