When consumers make a purchase, they are sometimes asked to pay a deposit upfront. This is quite common when, for instance, ordering furniture, appliances or custom-made items, as well as when booking services like home renovations or catering for an event. In these situations, consumers should be aware of both their rights and responsibilities to safeguard themselves should problems with the contract of sale arise.
First and foremost, consumers should understand the purpose of a deposit. When a deposit is paid, it signifies the buyer’s commitment to proceed with the purchase and complete the full payment once the product or service is provided. At the same time, the seller’s acceptance of the deposit represents their obligation to supply the agreed-upon product or service.
The amount of deposit a consumer may be asked to pay generally depends on the type of product or service being purchased, as well as the terms agreed upon between the buyer and the seller. For example, when ordering custom-made furniture, a higher deposit may be required since the seller is making personalised items that may be difficult to resell. In contrast, when buying standard household appliances, the deposit might be lower, as these items can easily be sold to other customers if the buyer cancels.
Typically, the seller determines the deposit amount, but consumers are not obliged to accept it without question. If they feel the requested amount is too high, such as, for instance, a 50 per cent deposit for a service that will not be provided for several months, they have the right to negotiate a lower sum that still secures the agreement.
Typically, the seller determines the deposit amount, but consumers are not obliged to accept it without question
If the trader refuses the consumer’s proposed deposit amount, the consumer should carefully consider whether to proceed with the purchase. It is important to feel comfortable with the financial commitment before making a payment.
Once both parties agree on the deposit amount, it should be clearly stated in the sales contract. The contract should also outline the payment terms, including how and when the remaining balance will be settled. For example, in the case of buying a car, the contract may specify that the remaining amount will be paid in instalments or in full upon delivery. Having these details in writing helps prevent disputes and ensures both the buyer and the seller are clear on their obligations.
Once consumers agree to pay a deposit, the sale is considered confirmed and legally binding. This means that if they later change their mind, they could lose the deposit. However, this risk can be mitigated if the sales contract includes a specific clause that allows the consumer to cancel the sale and receive a refund of the deposit paid, or part of it.
Consumer law considers it unfair for traders to demand that consumers pay an amount of deposit that is excessively high compared to the value of the goods or services being bought or hired if the consumer fails to fulfil their obligations.
When a consumer cancels a sales contract, the amount that the trader retains or charges must be in line with the trader’s actual losses resulting from the cancellation. Additionally, under the Unfair Contract Terms provisions of the Consumer Affairs Act, any contract that allows a trader to keep payments made by the consumer if the latter cancels the contract – without granting the consumer equivalent compensation if the trader cancels – is considered unfair and, therefore, not legally enforceable.
After paying a deposit, consumers may face situations where the trader is unable to supply the product or service as agreed in the sales contract. In such cases, consumers have the right to claim a refund of the deposit paid. Additionally, they may hold the trader responsible for any extra expenses incurred that are directly related to the trader’s failure to fulfil the contract. For example, if a consumer paid a deposit for a wedding venue that the trader later fails to provide, the consumer could claim the deposit back and may also be entitled to reimbursements for costs related to having to find an alternative venue at the last minute.
Consumers may be required to provide evidence of a breach of contract by submitting the original sales agreement. Therefore, it is crucial for consumers to ensure that the sales contract is written and clearly outlines all agreed terms, such as a detailed description of the product or service, the agreed delivery date and the total price.
In conclusion, paying a deposit is a common practice when buying goods or securing services. However, it is vital for consumers to understand their rights and responsibilities in these transactions. If there is a dispute regarding a deposit, and consumers are unsure about their legal rights, they can contact the MCCAA’s Office for Consumer Affairs for advice and support.
Odette Vella is director, Information and Research Directorate, MCCAA.