Consider one of the ways to ensure the fulfillment of obligations for future transactions. A deposit is a pretty strict guarantee of ensuring the fulfillment of all contractual conditions. Making and receiving it are regulated by civil law.
Legal regulations
The concept of a deposit is indicated in the Civil Code, namely in Art. 380. In accordance with this norm, a deposit is understood as a certain amount of money transferred by one of the parties to a contractual obligation in favor of another participant in payment of future payments under this agreement. You can consider the deposit as a fact confirming the signing of the contract and its entry into force with all the obligations stipulated by this agreement.
Goals
The main purpose of the deposit is to encourage the parties to the contract to properly fulfill the obligations that they have undertaken. It is also a guarantee of the interests of the opposite party if the obligation is not fulfilled or is improperly performed.
Functions
The main function of the deposit is a guarantee of ensuring all contractual clauses. In addition, there are others:
- Stimulation, that is, the incentive of the party obligated by agreement to the full fulfillment of obligations.
- A guarantee of protection of the interests of the opposite party, if the obligations are improperly performed or not fully.
- A guarantee of protection of the interests of each party to the agreement in case of default by the other party.
In addition, the deposit performs other important functions:
- Billing. It consists in the fact that this is part of the main payment stipulated by the contract.
- Security, that is, it ensures the fulfillment of agreed obligations.
- Evidence-Based. This function consists in the fact that its transfer confirms the fact of concluding an agreement.
What else does the concept of a deposit mean?
Areas of use
The deposit may participate in transactions under agreements involving bilateral obligations and the payment of a certain amount of money. The most common example of such agreements are transactions related to the purchase and sale of real estate.
In practice, such transactions may be carried out in the following cases:
- The buyer does not have the full amount of money in his hands. In this case, the deposit made by him acts as a guarantee for the seller that the buyer will pay the full amount of the payment within the terms indicated by the contract.
- The seller, who owns the property, did not complete all the documents for the property being sold. In this case, the deposit is transferred for the period required for the preparation of all documentation by agreement. This term is determined by the parties to the agreement by mutual agreement.
- The transaction object is encumbered. A similar situation is likely if the property being sold is a bank loan.
- One of the participants in the transaction is temporarily absent. In this case, the deposit guarantees the conclusion of the transaction as soon as the absent party returns and can conclude an agreement.
What is the difference between a deposit and an advance
Often, users confuse an advance and a deposit, since in both situations the money is transferred before the fulfillment of contractual obligations. Despite some similarities, these concepts are very different. The main difference is the consequences that occur in case of default. The full value of the goods (services, works) or a part thereof, paid in advance, is considered an advance.
In other words, introducing it does not oblige the parties to the agreement to fulfill obligations under the contract.Any of the participants has the right to refuse the transaction. In such a case, the advance payment is returned in full, and in some cases there is the possibility of collecting interest for the misuse of other people's money.
The return of the deposit looks completely different. The consequences for one of the parties in violation of the terms of the agreement under which it was given are harder. The deposit remains with the party receiving it if the obligations of the agreement are not fulfilled through its fault. In the opposite situation, when the party that received this amount is to blame for non-fulfillment of obligations, it is obliged to return two times more money to the other party to the transaction.
Advantages and disadvantages
A deposit is a rather risky way to secure contractual obligations, despite its versatility and simplicity.
Among the shortcomings, it is distinguished:
- It is impossible to recover it if the obligations are partially fulfilled. It does not matter if the violation of a contractual obligation is violated slightly. Courts proceed from the assumption that the rules are not applicable if the contract is improperly executed.
- A deposit is one of the measures of liability for default. This means that no penalty and double size is allowed.
- Not all obligations can be secured through a deposit. It must meet certain requirements: it can provide only a monetary obligation, they can only provide existing agreements.
- Judicial authorities often qualify a deposit as an advance.
Advantages
The deposit, in addition to disadvantages, has advantages:
- Courts do not reduce the amount when recovering it, for example, unlike forfeit. In other words, the aggrieved party can always return its money in full, and not to a lesser extent, as happens when recovering a forfeit.
- This is a convenient way of securing obligations. Therefore, it is widely used during bidding.
Execution of an agreement
The essence of the deposit is now clear. Draw up an agreement as a receipt. It must be compiled in writing. Experts recommend drafting a document in the presence of witnesses who affix their signatures to it. Collecting a deposit in case of violation of the terms of the contract is greatly facilitated if the agreement is notarized.
The paper must contain the established information. It is advisable to include complete information about the object, information about the participants in the transaction (name, passport information), amount of the deposit, the terms of fulfillment of contractual obligations, the signatures of each of the parties, witnesses, as well as the date of execution of the agreement.