Deposits and Part Payments

Money does not need to change hands to make a contract of sale binding, but as this can be difficult to prove, it is customary to ask for a deposit to ‘seal the deal'. Any deposit, or part payment, will suffice to make the contract legally binding on both sides. If either side then breaks the contract, then reasonable damages can be claimed by the injured party.

Deposit or part payment?

If the customer breaches the contract, i.e. has changed their mind and wants their money back, where does the retailer stand? A ‘deposit' is generally regarded by Trading Standards as 10% or under of the total price, so if the sum is around this figure, then the retailer does not have to return anything. If the amount is greater than 10%, then this is generally regarded as a ‘part payment', rather than simply a deposit and the retailer must refund part of the money.

Part payment refund

There are no exact rules governing the refunding of part payment, but these points should be taken into account

  • how long after entering the contract does the customer cancel
  • has the retailer done any work (even behind the scenes) towards the contract
  • has the retailer made a special order which may prove difficult to sell on
  • have the goods been customised

If the retailer wants to keep more than a ‘reasonable' sum towards his costs, then he should be prepared to justify his losses in writing, should a court require it.

Retailer unable to supply

If the retailer cancels the contract, then the consumer has the right to sue the retailer for their ‘reasonable losses'. If the retailer was unable to supply a ‘hot product' at the last moment and the consumer subsequently had to buy a higher price item elsewhere, the retailer could be sued for the difference.

Customer relations

Although the retailer may not have to give anything back, some will want to as part of their own customer relations agenda. However, it is worth making it very clear that returning the money is a goodwill gesture and the customer is not actually entitled to it by law.