Is a Deposit Refundable by Law
What is a deposit and how is it different from partial payment? When the pandemic didn`t shut down venues and weddings, business owners were faced with a mystery: what to do with all those deposits? It`s one thing to have a deposit and then have a client who just won`t show up at their event after you`ve prepared the venue and your services for them. It`s another to not even open the venue and allow your client and their guests to attend the wedding. Many of the companies I work with have found that they need to find a solution to any events that can`t happen. If a payment is a deposit, the general rule is that the deposit will not be refunded in case of breach of contract. Therefore, if the Buyer does not perform the contract or withdraws from the purchase, the Buyer is not entitled to a refund of the deposit if the Seller terminates due to the negative behavior of the Buyer. This is because the deposit was made as collateral for the service. It is important for photographers to note that the violation (by the photographer) entitles the couple to a full refund, including the “non-refundable” advance. It is also instructive to say that claiming that a client is “in breach” of their contract can backfire if a court finds that you, as a photographer, have instead breached or terminated the contract. The reason for the decision to repay the non-refundable advance is that the photographer, not the client, caused the breach of contract. The court held that it would be an injustice to grant the photographer the non-refundable bail because it would be a “windfall” for the aggrieved party that would be against the interests of justice.
Whether an advance payment is a down payment or a simple partial payment depends on what the parties intended to do when they contacted us. Howe v. Smith clarified that if a contract explicitly describes the advance payment as a “down payment” but says nothing about whether it is refundable or not, then it is legally classified as a deposit. This results in the rule that deposits are not reimbursed by law if the buyer terminates the contract before it is concluded. Whether you are a buyer or a seller, it is important to explicitly discuss the prepayment and agree whether it is a deposit or not. From the seller`s point of view, it is important to speak of partial payments as down payments if it is expected that the amounts will not be refunded in circumstances where the buyer cancels, as this would avoid verifiability of the damage suffered by the seller. If you have a question in this area where you need advice, please contact Jon Rathbone or call 01242 574244. For example, if a customer books that you then decide to reschedule, are the non-refundable fees enough to cover your business expenses if you can`t fill that window of opportunity with another customer? This is especially important when it comes to weddings, as it is a full day or a weekend.
What happens if a company does not disclose the terms of the non-refundable deposit or does not take the time to ensure that it charges a reasonable and proportionate amount? The Client or Client may have the right to receive this deposit and the Company shall not be entitled to compensation for the loss he has suffered for the time, effort and costs incurred up to that time. Yes, the couple has indicated their desire to get out of the contract. They asked for all their money, minus the non-refundable advance. The court could have considered this as an express revocation of the contract if the photographer had treated it as such. However, the photographer sent the couple back an email asking for a clear statement as to whether the couple intended to terminate their contract. Better yet, the Company should also attempt to obtain confirmation from the Client or Client that the non-refundable deposit is reasonable and proportionate to protect the Company`s legitimate business interests. Again, this may be included in the Terms and Conditions document used by the Company. You can also repeat this to the customer or the customer when you ask him to pay the deposit. Transparency is key! How do I know if the advance payment is a down payment? Without knowing any other information, based solely on the above facts, it appears that the deposit would not be refundable since the document requirements appear to be met and $100 is likely to be considered a reasonable and proportionate amount.
The first decision you need to make is, “Do you want the `payment` to be refunded?” If the customer is penalized for non-compliance with the contract, the customer will be bound to you and you will be compensated for your lost time. Whether an advance payment is a down payment or a simple partial payment depends on what the parties intended to do when they contacted us. Whatever you want to use in your practice photography, a deposit or an advance, be clear and concise when writing the terms and conditions, and be sure to talk to your client in advance about how refunds of holdbacks or deposits are made. If the deposit is significantly high compared to the total purchase price, it could be considered a penalty. For reasons of public order, the penalty clauses of contracts are not enforceable. Each case depends on the facts and the parties are therefore advised to seek legal advice in the event of a dispute regarding a filing. Kuisch against. Smith included a $640,000 down payment on a $14 million home with a clear and unambiguous clause that the deposit was non-refundable. Buyers canceled and the house was then sold for $15 million. The Kuish court concluded in a rising (rising) real estate market that the seller who withheld the deposit was not reasonably associated with “actual damages” and therefore constituted invalid forfeiture. Kuish relied on Freedman v. The Rector (1951) 37 Cal.
2d 16, which also concluded that it was inappropriate to keep the deposit money beyond the costs associated with a breach of contract, as it would unreasonably enrich the seller and the buyer “will suffer a penalty that goes beyond the damage caused by him”. (Freedman, 37 Cal2d at 19-20) Freedman looked at Civil Code 3294 and thought that forfeiture is equivalent to a penalty and if it is not allowed under a contract, just as punitive damages cannot arise from a contract. Note that Kuish also explained that in a declining market, if there was then damage to the seller, the deposit is likely to be withheld by the seller. (Kuish at p. 1429) However, don`t just blindly use the deposit or advance and hope to be insured. It is important to consider the language of the contract that gives you the right to retain the funds (i.e. Regulations, wording such as non-refundable, etc.). In general, a non-refundable advance with lump sum damages offered will help strengthen your planned business policy.
When you construct the language of the contract in your terms and conditions, you specify that your client`s advance or deposit is to guarantee your services on a specific date at a specific time. Indicate that the funds accepted for this take into account your photo studio, which waives the subsequent reservation of other customers for this date and time. Finally, indicate that a cancellation by the client will result in an economic loss for your studio. This should clearly alert the customer that the “payment” is non-refundable, while the customer gives the reason for their non-refund. .