Penitential Arras


The penitential deposit is a pact attached to any type of contract that consists of setting a price so that the parties can freely withdraw from the contract.

The penitential deposit is the delivery of an amount of money that takes place at the time of conclusion of a contract and guarantees free withdrawal by the parties to the contract. That is, in the event that the person who hired a service or work desists from it, he will lose the price set as a penitential deposit.

It is a price that must be paid before the contract is fulfilled and is known as a withdrawal deposit or signal.

Its main objective is the non-judicial claim for withdrawal, ensuring a possibility of withdrawal from the contract by the contracting parties. This is very important, since the penitential deposit does not give the right to breach the obligations, but to withdraw from the contract. Nor are they a confirmation of the contract like the confirmatory deposit.

If any of the parties withdraw, these deposits prevent the breach of contract from being judicially challenged since it does not exist, but there is a lawful and free withdrawal. But the price that constitutes these earnest money will be lost.

In case the buyer has breached it, he will be left without the money delivered, and in case the seller breaches it, he must return the money that was given to him as a duplicate penitential deposit.

Characteristics of penitential earnest money

The main characteristics of these earnest money are:

  • Colloquially known as a signal or bond to these earnest money.
  • They allow you to withdraw from the contract without any legal consequences. That is, it is a lawful withdrawal.
  • They are characteristics of any type of contract, although it is usually used in sales contracts.
  • They consist of setting an agreed price.
  • They can be freely agreed by the parties and there should be a writing or receipt where the existence and amount of the same is reflected.
  • They are not compensatory. In case of default, the seller can keep these earnest money.
  • They have an accessory character of the principal obligation, which consists of the delivery of a thing for the price.
  • The nullity of the deposit agreement does not imply the nullity of the main contract.

Different types of earnest money

There are different types of earnest money, that is, to deliver money to the seller to achieve different purposes:

Example of a penitential deposit

To understand it better, we see an example: A is the seller of a painting and puts it on sale for $ 100 and B is the buyer who acquires the painting. B gives $ 20 of the painting as a penitential deposit.

In the event that A, the seller, regrets putting the painting up for sale, he will have to return the deposit paid by B in duplicate, that is, he will have to pay B $ 40.

Likewise, if B regrets finally buying the painting, he would lose the $ 20 given as a penitential deposit.

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