After concluding a sales agreement, consumers are sometimes asked to pay a deposit on the amount due. Very often, this request is made by sellers to avoid situations in which consumers change their mind and cancel the agreed sale. When a deposit is paid, the sales commitment becomes more binding and consumers are less likely to cancel a sale, as it may result in losing the deposit paid.

A sales agreement is, however, not only binding on consumers but also on sellers, as the latter are obliged to provide the product or service ordered at the price and date agreed. It is in the best interest of both parties to make sure that the terms and conditions of the sale are put down in writing. This would clarify the rights and obligations of both consumer and seller.

There are, in fact, legal consequences when the consumer or seller decide to terminate the sales agreement. If it is the consumer who decides to not proceed with the sale, in such situations it is standard practice that the consumer loses 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 to refund the deposit. Often traders decide to keep deposits as compensation for expenses incurred in connection with the sales agreement.

Sales agreements are ideally always put in writing

Losing the deposit is not the only risk consumers face when they change their mind and cancel the sale. They may be legally obliged to continue with the purchase. This would mean paying in full for the product or service ordered.

Regarding the actual deposit paid, consumers should always try to pay the least possible amount. Various problems may crop up before the product or service ordered is provided. For instance, there is the risk that the seller may go out of business.

If this happens, it will be difficult for consumers to either get the goods ordered or their money back. There could also be problems with the actual order, such as a different product is delivered or it arrives with missing components. In such situations, the consumers’ possibility to resolve the problem without too much hassle would depend on how much money they still owe the trader.

Consumers have the legal right to cancel a sales agreement and claim full refund of the deposit paid when the supplier of the contract or service is unable to adhere to the original sales agreement. Hence, it is very important that the contract of sale includes all the details of the sale, such as a description of the product or service agreed on, the total price, delivery or performance date, the amount of deposit paid and also the agreement on how the rest of the payment will be made. Besides refunding the deposit paid, the trader may also be held liable to any other reasonable costs consumers may have incurred as a result of the seller’s breach of contract.

Consumer disputes concerning deposits and whether consumers are entitled to claim a refund of the deposit paid may be referred for further information and assistance to the Office for Consumer Affairs. This office may be contacted by e-mail on info@mccaa.org.mt, by phone on 8007 4400 and also by sending a message on the authority’s Facebook page, MCCAA.

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