When you buy products and services there may be an option to pay a deposit and then you pay the balance when the item is delivered or the service is completed.
Paying a deposit gives security to both you and the trader that you intend to buy the product or service. The amount of the deposit and other terms are agreed between you and the seller – see below.
What is a deposit?
When you pay a deposit, you are entering into a contract with the trader. The contract can be made verbally or in writing. As parties to the contract, both you and the seller have certain legal rights and obligations. The terms of the contract are a matter between you and the trader.
Before signing the agreement and paying the deposit, you should be clear about the following:
- How much the deposit will be – this could be a set amount or a percentage of the total cost
- Payment date when the balance will be due
- If there are instalments, how much each individual payment will be
- Details of the exact product or service you are buying – for example, the colour or style of the product or how the service will be performed
- The date the product or service will be provided – for example, when will a product be delivered or the work completed
- In what circumstances the deposit will be refunded (either fully or partially)
- If there is any non-refundable amount or cancellation charge, if you decide to cancel
You should ask for confirmation of this information in a durable format (for example, hard copy or by email). Always get a receipt showing the amount of the deposit paid.
The terms of this contract must be clear and fair. Terms that may be unfair can include:
- That deposits are non-refundable in all circumstances
- That if you cancel, you must pay all the trader’s expenses plus anticipated gross profit. The trader is generally only entitled to keep an amount that is enough to cover their actual losses that result directly from your cancellation. This could include costs already incurred or loss of profit (for example, where you cancel at short notice).
Find out more about unfair contract terms.
If things go wrong
It is always easier to know what your rights and obligations are if you have details of the contract in writing. However, a verbal contract is also enforceable.
The terms of the contract apply to both you and the trader:
- If the trader does not provide what they agreed under the terms of the contract you may have the right to ask for a return of the deposit
- If you pay a deposit but then change your mind about paying the balance, the trader may not have to refund it. However, the amount kept must be a genuine reflection of the trader’s actual losses that result directly from your cancellation and must not be excessive.
There are some situations where you may be able to ask for a refund of a deposit. These include where:
- The trader is unable to supply the product or perform the service you ordered
- The trader delivers the product or performs the service on a date that is significantly later than the original date agreed
- You cannot agree a new date
If the trader breaches the terms of the contract and is refusing to refund your deposit agreed, then you may have the following options:
- If you paid using credit or debit card, you can contact the card provider and ask them to reverse the transaction. This is known as chargeback. Some other payment methods also provide protection schemes (for example, PayPal buyer protection). The Competition and Consumer Protection Commission (CCPC) has more on chargeback.
- Take a claim against the trader using the small claims procedure. For cross-border disputes within the EU, you can avail of the European small claims procedure.
Trader goes out of business
If you buy goods (or pay a deposit on them) and the trader goes out of business before they are delivered, it may be difficult for you to get either the goods or your money back.
Usually the trader will owe money to several people so your claim is just one of many. There are rules for the priority to be given to the various debts in the case of the business going into liquidation or receivership. Generally, you will be low in the order of priority.
If you paid the deposit using a secure method payment such as a credit or debit card you can contact your bank or credit card provider to get advice and, if possible, use chargeback.
You can read more in our document on companies going out of business.
Further informationYou can contact the following organisations for advice and support:
- Dispute with an Irish-based trader: Contact the Competition and Consumer Protection Commission (CCPC) for information and advice
- Dispute with a trader based in another EU country: Contact the European Consumer Centre (ECC) Ireland for advice about cross-border transactions
Find out more about consumer protection organisations.