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When paying a deposit

Should problems arise with the product or service delivered a consumer’s negotiating strength often depends on how much money they still owe the trader.

Should problems arise with the product or service delivered a consumer’s negotiating strength often depends on how much money they still owe the trader.

Sellers often ask consumers to pay a deposit to confirm and conclude the purchase of a product or service. Such sales agreements are legally binding and both parties are obliged to abide by them. While on one hand the consumer is committed to pay in full for the product or service once it is delivered, on the other hand the trader is obliged to provide the product or service ordered as stipulated in the contract of sale. In other words, once a sale is agreed upon one cannot just change one’s mind and cancel it.

To avoid change of mind situations consumers are advised to do a bit of shopping around before deciding to pay a deposit. In case of products that are not needed in the immediate present there is no need to order them years before they are going to be used. Besides the fact that there will be new models to choose from, consumers should also keep in mind that their circumstances and needs may change.

When consumers opt to cancel a contract of sale they are seen as breaching a legally binding sales agreement and may face unpleasant financial consequences. In such situations consumers usually lose 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. However, consumers do not only risk losing the deposit but the seller may also oblige them to honour the original sales agreement. This would mean paying in full for the product or service rendered.

Consumers have the right to negotiate the amount of deposit to be paid

In situations where it is the seller who is unable to fulfil the original sales agreement, consumers have the right to claim a full refund of the deposit paid and also compensation for additional expenses incurred as a direct result of the seller’s inability to provide the product or service ordered. Consumers are also entitled to claim a refund if the goods ordered are delivered damaged or do not conform to the original sales contract.

When asked to pay a deposit consumers should be careful about the amount they pay. Since this amount or percentage is not regulated by any law it is something that the seller and buyer need to agree on. If it is the trader who proposes the amount of deposit to be paid, consumers should carefully assess if the sum requested is reasonable or too high when compared to the total price of the product/service ordered.

Consumers should remember that they have the right to negotiate the amount of deposit to be paid. If the trader refuses the proposed amount, consumers may wish to reconsider whether or not to proceed with the sale. Once the amount of deposit is agreed on, consumers should make sure that this is clearly written on the contract of sale.

How the rest of the payment is going to be made is another matter consumers need to negotiate with the seller. Will the payment be done through instalments or does the full balance have to be paid upon delivery?

It is in consumers’ best interest to pay the least possible amount of deposit. A deposit is paid on a product or service that the consumer has not yet received or consumed, and various problems may crop up in the interim period.

One of the worst things that can happen is that the seller may go out of business. If this happens, consumers may face a hard time in getting either the goods or a refund of the deposit paid. Usually when sellers close their business they owe money to a number of people, so the consumer’s claim is one of many.

There could also be problems with the products ordered; for instance, a different product may be delivered or it may arrive with missing components. Consumers should not forget that when such problems arise their strength often depends on how much money they still owe the trader. So consumers should hold on to their money until what they have ordered is delivered and they have carefully checked it out.

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

odette.vella@mccaa.org.mt

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