The confirmatory deposit is characteristic of the sales contract and is proof of the conclusion of the contract through the payment of a part of the price.
The confirmatory deposit only serve to prove the existence and validity of the sale contract, but they are not a clause that guarantees withdrawal like the penitential deposit or guarantee the fulfillment of the contract.
- If the contract is breached, these deposits do not prevent the breach of contract from being judicially challenged. But the price that constitutes these earnest money will be lost.
- If the contract is fulfilled, these deposits will form part of the total price agreed in the contract. In other words, the price that has been paid as a deposit to confirm the contract will be deducted from the total price.
Characteristics of the confirmatory deposit
The main characteristics of the confirmatory deposit are:
- Colloquially it is known as a signal and they are usually the most common.
- They confirm the existence of the contract, but do not allow withdrawal without legal consequences.
- Although they are characteristics of the sales contract, they can be established in other types of contracts.
- They consist of an advance of the agreed price that in case of not being fulfilled the seller has no obligation to return it.
- They can be freely agreed by the parties and it is convenient that there 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 deposits and also request compensation for breach of contract.
- 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.
Types of earnest money
There are different types of earnest money, that is, to deliver money to the seller to achieve different purposes:
Confirmatory deposit example
To understand it better, we see an example:
A is the seller of a motorcycle and puts it on sale for € 100 and B is the buyer who acquires the motorcycle.
B grants € 20 of the motorcycle as a confirmatory deposit. This input is also known as a signal. In the event that B does not comply with the sale and does not acquire the motorcycle and. therefore. do not pay the price, you will not get the € 20 back. On the other hand, if you comply with the contract of sale and purchase the motorcycle, you will only have to pay € 80 (€ 100 initial price - € 20 confirmatory deposit).
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