Deposit query, selling a private car....
Discussion
A good friend of mine back in the Summer 05 sold his pride & joy for £15,000 at a classic car show, the buyer having only ever seen the car at the show paid a deposit of £1,000 in cash & said he will be back in September to pay the balance and collect the car. No receipt was given, just a hand shake. Since then my mate has contacted the buyer 3 times by fax & Emails & spoke over the phone twice, each time the buyer promises he will be over soon to complete the deal.
Of course time has now gone buy, he still promises to come over with the cash (he always talks cash) but the car is now being re-advertised, how will my mate stand if he sells the car to someone else & this guy then comes up with the dosh, or wants his deposit back? The buyer has never driven the car, has doesn't know where my mate lives, and no receipt was given!
What would you all do?
Of course time has now gone buy, he still promises to come over with the cash (he always talks cash) but the car is now being re-advertised, how will my mate stand if he sells the car to someone else & this guy then comes up with the dosh, or wants his deposit back? The buyer has never driven the car, has doesn't know where my mate lives, and no receipt was given!
What would you all do?
Your mate needs to ring the guy again and give him a deadline of say 2 weeks, after which he will no longer accept the money as a deposit for the car.
Regarding the £1000, your mate could keep it, as there is no record of the buyer giving him the money. Depends if your mate is bigger than the buyer I suppose !
Personally, I'd return it, but that's just me.
Edited to add, what kind of loney gives £1000 in cash to a total stranger and then walks off without a receipt and without an agreement as to when to return!
>> Edited by tonto on Thursday 5th January 12:15
Regarding the £1000, your mate could keep it, as there is no record of the buyer giving him the money. Depends if your mate is bigger than the buyer I suppose !
Personally, I'd return it, but that's just me.
Edited to add, what kind of loney gives £1000 in cash to a total stranger and then walks off without a receipt and without an agreement as to when to return!
>> Edited by tonto on Thursday 5th January 12:15
Legally a contract is formed when two parties make an agreement. This may be verbally, a handshake, written on the back of a fag packet, or written up by your solicitors.
As long as both parties fully understand the agreement then this is legally binding. A deposit by definition in not refundable, otherwise there is no point in doing it. The deposit was given to your friend in respect that the buyer did not have the funds at that time, and the agreement was that the £1000 would prevent your friend selling it elsewhere.
In common law if not specified, this would be a 'reasonable' amount to time. Three months is not reasonable, and regardless of this the agreement was made that the buyer would return in September to pay the rest of the payment. The buyer has therefore already broken this agreement, and your friend has every right to keep the money to cover for the fact he has been messed around, could have sold it elsewhere, and invested the money somewhere else.
If it were me though, as a gesture of goodwill I would send a carefully worded letter, and send it by recorded delivery giving the buyer seven days to pay for the car, otherwise the deposit will be lost and it will be advertised elsewhere.
As long as both parties fully understand the agreement then this is legally binding. A deposit by definition in not refundable, otherwise there is no point in doing it. The deposit was given to your friend in respect that the buyer did not have the funds at that time, and the agreement was that the £1000 would prevent your friend selling it elsewhere.
In common law if not specified, this would be a 'reasonable' amount to time. Three months is not reasonable, and regardless of this the agreement was made that the buyer would return in September to pay the rest of the payment. The buyer has therefore already broken this agreement, and your friend has every right to keep the money to cover for the fact he has been messed around, could have sold it elsewhere, and invested the money somewhere else.
If it were me though, as a gesture of goodwill I would send a carefully worded letter, and send it by recorded delivery giving the buyer seven days to pay for the car, otherwise the deposit will be lost and it will be advertised elsewhere.
justinp1 said:
Legally a contract is formed when two parties make an agreement. This may be verbally, a handshake, written on the back of a fag packet, or written up by your solicitors.
As long as both parties fully understand the agreement then this is legally binding. A deposit by definition in not refundable, otherwise there is no point in doing it. The deposit was given to your friend in respect that the buyer did not have the funds at that time, and the agreement was that the £1000 would prevent your friend selling it elsewhere.
In common law if not specified, this would be a 'reasonable' amount to time. Three months is not reasonable, and regardless of this the agreement was made that the buyer would return in September to pay the rest of the payment. The buyer has therefore already broken this agreement, and your friend has every right to keep the money to cover for the fact he has been messed around, could have sold it elsewhere, and invested the money somewhere else.
If it were me though, as a gesture of goodwill I would send a carefully worded letter, and send it by recorded delivery giving the buyer seven days to pay for the car, otherwise the deposit will be lost and it will be advertised elsewhere.
A deposit is not automatically non-refundable if the buyer fails to complete the purchase. In fact, quite the opposite - unless expressed otherwise, it is simply a down-payment on the agreed purchase price made as a token of good faith. If the buyer repudiates the contract (in words or by failure to complete, having been required to do so), the seller's right to possession of the money ends and it must be returned. But (and this is the big but), the seller would then become entitled to claim damages for breach of contract. So if, for example, he sold the car to someone else and the best price he could obtain was £14,000, he would be entitled to claim £1,000 damages from the first buyer and could apply the deposit against his loss. If, however, he sold the car for £14,500, he could only claim £500 loss and would be obliged to repay £500.
As far as time for performance is concerned (i.e. completion of the purchase), if not specified when the contract is made, it would be up to the seller to require the buyer to complete 'within a reasonable time', failing which he (the seller) would reagrd the contract as repudiated. This would not affect the position regarding the deposit.
Observer2 said:
Legally a contract is formed when two parties make an agreement. This may be verbally, a handshake, written on the back of a fag packet, or written up by your solicitors.
As long as both parties fully understand the agreement then this is legally binding. A deposit by definition in not refundable, otherwise there is no point in doing it. The deposit was given to your friend in respect that the buyer did not have the funds at that time, and the agreement was that the £1000 would prevent your friend selling it elsewhere.
In common law if not specified, this would be a 'reasonable' amount to time. Three months is not reasonable, and regardless of this the agreement was made that the buyer would return in September to pay the rest of the payment. The buyer has therefore already broken this agreement, and your friend has every right to keep the money to cover for the fact he has been messed around, could have sold it elsewhere, and invested the money somewhere else.
If it were me though, as a gesture of goodwill I would send a carefully worded letter, and send it by recorded delivery giving the buyer seven days to pay for the car, otherwise the deposit will be lost and it will be advertised elsewhere.
A deposit is not automatically non-refundable if the buyer fails to complete the purchase. In fact, quite the opposite - unless expressed otherwise, it is simply a down-payment on the agreed purchase price made as a token of good faith. If the buyer repudiates the contract (in words or by failure to complete, having been required to do so), the seller's right to possession of the money ends and it must be returned. But (and this is the big but), the seller would then become entitled to claim damages for breach of contract. So if, for example, he sold the car to someone else and the best price he could obtain was £14,000, he would be entitled to claim £1,000 damages from the first buyer and could apply the deposit against his loss. If, however, he sold the car for £14,500, he could only claim £500 loss and would be obliged to repay £500.
As far as time for performance is concerned (i.e. completion of the purchase), if not specified when the contract is made, it would be up to the seller to require the buyer to complete 'within a reasonable time', failing which he (the seller) would reagrd the contract as repudiated. This would not affect the position regarding the deposit.
I understand your methodology however it would all depend on exactly what was agreed when the money was taken. The money was not specifically taken a downpayment, but it was understood to be a deposit. Technically when the sale is made, the deposit is returned and the full price is paid. The standard 'in the trade' as far as I understand that a deposit is non-refundable, it is could be argued that this was implicitly understood by both parties. Thus the failure to complete on the contract would mean that the damages would be liquidated, in this case set at £1000. It could be argued that this amount was also considered. If it were £10,000 it could be argued that this is truly a downpayment. If it were £10 it would be meaningless. £1000 was most likely agreed by both parties as the buyer wanted to give the security that he would buy the car at a later date, and £1000 if a large enough sum to be worthwhile to the seller for keeping for the hassle if the buyer messes him around, and any costs involved in the failure to complete on the sale.
An important factor is the £1000. This is the amount considered as liquidated damages for failure to complete. The buyer took this as it would cover any advertising costs, travelling/show costs, and the opportunity cost from not being able to sell the car elsewhere. If it is not intended to be binding by both parties the amount would have been £10 or £100, or nothing at all. It is for this reason I would argue that the £1000 was considered as liquidated damages if the buyer failed to buy the car.
The deciding point is that at the point of sale, did he really expect the deposit to be returned if he failed to buy the car? All of the factors suggest to me he did not.
It could also be argued that there are two contracts present. One is to purchase the right of first refusal on the car until September for £1000. The other is to pay £14,000 in September to own the car.
>> Edited by justinp1 on Thursday 5th January 19:16
justinp1 said:
I understand your methodology however it would all depend on exactly what was agreed when the money was taken. The money was not specifically taken a downpayment, but it was understood to be a deposit. Technically when the sale is made, the deposit is returned and the full price is paid. The standard 'in the trade' as far as I understand that a deposit is non-refundable, it is could be argued that this was implicitly understood by both parties. Thus the failure to complete on the contract would mean that the damages would be liquidated, in this case set at £1000. It could be argued that this amount was also considered. If it were £10,000 it could be argued that this is truly a downpayment. If it were £10 it would be meaningless. £1000 was most likely agreed by both parties as the buyer wanted to give the security that he would buy the car at a later date, and £1000 if a large enough sum to be worthwhile to the seller for keeping for the hassle if the buyer messes him around, and any costs involved in the failure to complete on the sale.
An important factor is the £1000. This is the amount considered as liquidated damages for failure to complete. The buyer took this as it would cover any advertising costs, travelling/show costs, and the opportunity cost from not being able to sell the car elsewhere. If it is not intended to be binding by both parties the amount would have been £10 or £100, or nothing at all. It is for this reason I would argue that the £1000 was considered as liquidated damages if the buyer failed to buy the car.
The deciding point is that at the point of sale, did he really expect the deposit to be returned if he failed to buy the car? All of the factors suggest to me he did not.
It could also be argued that there are two contracts present. One is to purchase the right of first refusal on the car until September for £1000. The other is to pay £14,000 in September to own the car.
>> Edited by justinp1 on Thursday 5th January 19:16
I think you've made a few assumptions there which may be valid or not - I don't know and suspect you don't either. The original poster said "the buyer ... paid a deposit of £1,000 in cash & said he will be back in September to pay the balance and collect the car". That's a downpayment on my reading - "I'll pay £x now and the balance when I take delivery", so my analysis is, imo, the better one. It may be possible to argue from a 'trade custom' angle but this was a private sale anyway (as I read it) so trade practice is arguable irrelevant. I'd also observe that LDs are unusual in a private contract - how many MoPs understand what it means anyway?
Whatever - I'm not suggesting that the seller in this case should rush to pay the money back. Just pointing out the possible contractual effect of the transaction that was made.
Observer2 said:
I understand your methodology however...
I think you've made a few assumptions there which may be valid or not - I don't know and suspect you don't either. The original poster said "the buyer ... paid a deposit of £1,000 in cash & said he will be back in September to pay the balance and collect the car". That's a downpayment on my reading - "I'll pay £x now and the balance when I take delivery", so my analysis is, imo, the better one. It may be possible to argue from a 'trade custom' angle but this was a private sale anyway (as I read it) so trade practice is arguable irrelevant. I'd also observe that LDs are unusual in a private contract - how many MoPs understand what it means anyway?
Whatever - I'm not suggesting that the seller in this case should rush to pay the money back. Just pointing out the possible contractual effect of the transaction that was made.
Fair enough. It would be an interesting case if it got that far, however I would have thought the threat of losing his deposit would spur him into action or at least leave the seller to sell the car to someone else.
Although, as you say it does come down to the legal understanding of the members of the public. Although they may not know the laws and statute, I would guess that the magistrates would go on a 'common sense' way forward.
In essence the case is the guy paid a deposit to buy a car - did he put it up on the understanding he may lose it?
My guess is though, that it would never get that far. If it were me, I would send the guy a letter, if there was no response I would put the car up for sale. If it didnt make £15,000 I would keep the difference. If it did, I would probably give the rest back, less any out of pocket costs caused.
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