Deposits and deposits: the differences and refund procedures
Despite their similarities, deposits and deposits are not the same thing.
When you sign an order form or a contract, you will probably be asked to pay a sum to seal your commitment or block a booking. But you should be aware that, for the same payment, the effects are different depending on whether it's a deposit or a down payment.
But what is the difference between a deposit and an advance payment? We take a look at the definition of each term, the differences between them, and answer all the questions you may have in our FAQ. We're off!
Deposits: definition
A deposit is a sum paid in advance to purchase goods or pay for a forthcoming service, generally 10% of the total amount (but may be higher).
The payment of this sum does not legally bind the buyer, who can go back on his decision. However, if they wish to cancel their purchase, the deposit is forfeited, unless otherwise stipulated in the contract.
On the other hand, the deposit is binding on the seller. If, in the end, the seller does not provide the service or goods agreed, he will have to reimburse the buyer twice the amount of the deposit paid.
💡 Good to know: in the case of distance or credit selling, consumers are protected by a 14-day withdrawal period. If they withdraw during this period, the deposit must be refunded. The terms of the contract may provide for a longer period.
Down payment: definition
A deposit is also a sum paid in advance to purchase goods or pay for a future service. It is an initial payment that is deducted from the total sum due, generally equivalent to 10% of the total sum.
Legally, a deposit is binding on both parties. In the event of withdrawal, and unless there is an amicable agreement :
- the seller is liable for damages,
- the buyer must pay the full price.
As with deposits, the buyer may benefit from a withdrawal period to have the sum advanced refunded, depending on the situations set out above.
💡 Generally, the deposit is the subject of a dedicated deposit invoice, providing official proof that it has been paid. The amount will then be deducted from the final invoice.
To manage advance payments automatically and keep an eye on deadlines, don't hesitate to install an invoicing software package:
Deposit or advance payment: what's the difference?
The main difference between a deposit and a down payment is that a down payment is legally binding on both parties, whereas a deposit is only binding on the seller. This has different financial and legal repercussions if either party cancels the contract.
➡️ For example, for a purchase of €3,500, if the buyer pays :
- a deposit of €350
- and finally renounces the purchase, he will only lose his €350 ;
- and the seller cancels the sale, he must pay €700 to his customer.
- a deposit of €350
- and the customer finally renounces the purchase, the seller can ask the customer to pay the balance of €3,150;
- and the seller cancels the sale, he must refund the deposit paid to the customer, plus additional damages.
FAQ: refunding deposits
Are deposits collected?
Yes, they are generally cashed, as this is what validates the purchase or reservation. They should be distinguished from a guarantee cheque, which should only be cashed in the event of a problem.
Are deposits refundable?
If you withdraw from your purchase, the seller is not obliged to reimburse the deposit paid, unless you do so within the legal withdrawal period.
However, you can always try to open a dialogue and persuade the seller to refund all or part of the deposit, or to give you a credit note. However, the seller is under no obligation to comply with your request.
On the other hand, if the seller does not honour his part of the contract, he is obliged to pay double the amount of the deposit. We'll explain how to do this below.
How do I get my deposit refunded?
If the seller does not honour their commitment, they must refund double your deposit. If, after contacting him informally, he fails to do so, send him formal notice to pay by letter with acknowledgement of receipt.
If you don't hear from him after sending a reminder , you can take your case to court.
💡 Good to know:
- if the amount in dispute does not exceed €10,000, you can take your case to the district court without a lawyer;
- above €10,000, you must take your case to the tribunal de grande instance (district court), with the assistance of a lawyer.
What happens if delivery of the order is delayed?
If you still have not received your order three months after paying the deposit, you will have to pay interest until the seller takes delivery.
At the end of the 3 months, you can put the seller on formal notice to pay you by setting a new delivery date. If the seller still fails to meet this deadline, you are entitled to ask for the contract to be terminated and the deposit refunded.
The seller then has 14 days in which to do this, failing which he will be liable to a surcharge of between 10% and 50% if he is more than 60 days late.
What happens to the deposit if the buyer cancels?
What happens to the deposit if your customer decides to cancel? There are two possible scenarios:
- If the customer withdraws within the legal deadline, you must refund the deposit;
- if the customer withdraws after the deadline, you can keep the deposit paid and claim the outstanding balance.
Can I get my deposit back?
Yes, but only if the sale is subject to a withdrawal period and you withdraw within that period.
Otherwise, you cannot get your deposit back, and the trader can keep it. You will also have to pay any outstanding balance.
Deposit or advance for a seasonal rental?
If conditions allow, prefer to pay a deposit for greater flexibility and peace of mind.
Is it possible for private individuals to pay each other a deposit?
Yes, it's quite possible, and quite common, especially for car sales between private individuals involving relatively large sums.
If nothing is stipulated, the payment made corresponds to a deposit, as stipulated in article L214-1 of the French Consumer Code. On the other hand, if a promise of sale or order form mentions the term "deposit" in relation to the sum paid, then the buyer undertakes to complete the sale and therefore to pay the full amount.