Car dealer refuses to refund £500 deposit...

[belly2002]

DBSV8 said:

he's trying to claim his deposit back not grease the sweaty Palm of some brief for another £500 for two minutes work

And he's got no legal right to do so. A decent sweaty palmed brief would probably have told him that without taking any cash off him when he called them to ask if they'd take the case on.

[belly2002]

JustinP1 said:

Must admit, I've never heard of someone at the CAB refer to Chitty before!

haha

[PurpleMoonlight]

belly2002 said:

1. The general rule is that where money is expressly paid as a deposit (as opposed to making payments by instalment), the deposit is regarded as security for the completion of a purchase and it will be assumed, even in the absence of a forfeiture of deposit clause in the contract, that it is intended to be forfeited in the event that the buyer defaults. (Howe v Smith (1884) 27 Ch D 89, 97-98 and Stockloser v Johnson [1954] 1 Q.B. 476, 490).

Interesting.

So what if the dealer cancels the contact? What penalty do they incur?

[wolves_wanderer]

PurpleMoonlight said:

belly2002 said:

1. The general rule is that where money is expressly paid as a deposit (as opposed to making payments by instalment), the deposit is regarded as security for the completion of a purchase and it will be assumed, even in the absence of a forfeiture of deposit clause in the contract, that it is intended to be forfeited in the event that the buyer defaults. (Howe v Smith (1884) 27 Ch D 89, 97-98 and Stockloser v Johnson [1954] 1 Q.B. 476, 490).

Interesting.

So what if the dealer cancels the contact? What penalty do they incur?

The penalty of not having sold a car?

[PurpleMoonlight]

wolves_wanderer said:

The penalty of not having sold a car?

That's not a penalty, that's their choice.

[belly2002]

PurpleMoonlight said:

Interesting.

So what if the dealer cancels the contact? What penalty do they incur?

No penalties, such a thing wouldn't be enforceable

But if the dealer was daft enough not to return the deposit when he was in breach, the buyer could bring a restitutionary claim for its return on account of the total failure of consideration on the dealer's part. He'd have to give it back. And of course, standard contractual damages in addition, in the event that it cost the buyer more to get the same motor somewhere else (subject to mitigation and remoteness of course).

[wolves_wanderer]

PurpleMoonlight said:

wolves_wanderer said:

The penalty of not having sold a car?

That's not a penalty, that's their choice.

It is a penalty when the whole point of your business is to sell cars.

[PurpleMoonlight]

belly2002 said:

But if the dealer was daft enough not to return the deposit when he was in breach, the buyer could bring a restitutionary claim for its return on account of the total failure of consideration on the dealer's part. He'd have to give it back. And of course, standard contractual damages in addition, in the event that it cost the buyer more to get the same motor somewhere else (subject to mitigation and remoteness of course).

The buyer cancels and they will be penalised at least the deposit.

The seller cancels and they are penalised nothing.

Seems very biased in favour of one party to me, which is one of the tests for an unfair contract I believe.

[wolves_wanderer]

PurpleMoonlight said:

The buyer cancels and they will be penalised at least the deposit.

The seller cancels and they are penalised nothing.

Seems very biased in favour of one party to me, which is one of the tests for an unfair contract I believe.

Is the whole point not that in this sort of an example one party is far more likely to pull out than the other, hence the apparent bias?

Genuine question btw.

[belly2002]

PurpleMoonlight said:

which is one of the tests for an unfair contract I believe.

Not sure what the point is.

Do you mean that the forfeiture of deposit clause in the dealer's T&C's might be an unfair contract term, and therefore void under the Unfair Terms in Consumer Contracts Regs? If so, here's where I covered that point one more time.

belly2002 said:

10. Assuming the buyer was buying in a personal capacity, the Unfair Terms in Consumer Contracts Regulations may apply. This is not certain though (on account of the fact that even without the forfeiture clause, there would be an assumption that the seller could keep the deposit). Without lengthening this post further by giving detailed reasons, even if they did apply, I very much doubt that clause (that's standard practice in the trade) allowing a 1.85% deposit being retained on a flagrant breach would be considered unfair.

[PurpleMoonlight]

belly2002 said:

Not sure what the point is.

Do you mean that the forfeiture of deposit clause in the dealer's T&C's might be an unfair contract term, and therefore void under the Unfair Terms in Consumer Contracts Regs? If so, here's where I covered that point one more time.

belly2002 said:

10. Assuming the buyer was buying in a personal capacity, the Unfair Terms in Consumer Contracts Regulations may apply. This is not certain though (on account of the fact that even without the forfeiture clause, there would be an assumption that the seller could keep the deposit). Without lengthening this post further by giving detailed reasons, even if they did apply, I very much doubt that clause (that's standard practice in the trade) allowing a 1.85% deposit being retained on a flagrant breach would be considered unfair.

My point is that there is not an equal potential penalty for either party. The contract is therefor potentially unreasonably weighted on favour of one party, the dealer. I don't see the percentage deposit being retained as of right (under 130 year old case law) as being relevant to the balance of the contract.

It may be that the case law outweighs the unfair contracts legislation, but on the other had it doesn't the distance selling legislation so maybe not.

Just my thoughts really.

[photosnob]

belly2002 said:

PurpleMoonlight said:

which is one of the tests for an unfair contract I believe.

Not sure what the point is.

Do you mean that the forfeiture of deposit clause in the dealer's T&C's might be an unfair contract term, and therefore void under the Unfair Terms in Consumer Contracts Regs? If so, here's where I covered that point one more time.

belly2002 said:

10. Assuming the buyer was buying in a personal capacity, the Unfair Terms in Consumer Contracts Regulations may apply. This is not certain though (on account of the fact that even without the forfeiture clause, there would be an assumption that the seller could keep the deposit). Without lengthening this post further by giving detailed reasons, even if they did apply, I very much doubt that clause (that's standard practice in the trade) allowing a 1.85% deposit being retained on a flagrant breach would be considered unfair.

What is the consumer was dyslexic and this contract was not fully explained to them? How would this apply to the disability discrimination act?

I'm being pedantic on purpose. There is so much room for rubbish here that no big company would instruct solicitors and barristers to defend this, or litigate against a normal person. IMO.

Big companies settle. The dealership (assuming they are a chain) would settle. That is my experience. I've never lost against a big company.

[belly2002]

PurpleMoonlight said:

My point is that there is not an equal potential penalty for either party. The contract is therefor potentially unreasonably weighted on favour of one party, the dealer. I don't see the percentage deposit being retained as of right (under 130 year old case law) as being relevant to the balance of the contract.

It may be that the case law outweighs the unfair contracts legislation, but on the other had it doesn't the distance selling legislation so maybe not.

Just my thoughts really.

I don't think you're arguing just for the sake of it so I will try to explain. The UTCC regs say that if a term is unfair it shall not be binding. The term, that is. A contract isn't unfair, just a term within it (unless every term in it is unfair, I guess). So if you sever the express term regarding forfeiture of deposit, it likely makes no difference, because you don't even need a term in the contract for forfeiture of deposit.

PS. Old cases that haven't been overruled are good law. They haven't been overruled because they don't need overruling. And in any case, like it or lump it; this is a common law jurisdiction and precedent is binding.

[ging84]

belly2002 said:

I don't think you're arguing just for the sake of it so I will try to explain. The UTCC regs say that if a term is unfair it shall not be binding. The term, that is. A contract isn't unfair, just a term within it (unless every term in it is unfair, I guess). So if you sever the express term regarding forfeiture of deposit, it likely makes no difference, because you don't even need a term in the contract for forfeiture of deposit.

PS. Old cases that haven't been overruled are good law. They haven't been overruled because they don't need overruling. And in any case, like it or lump it; this is a common law jurisdiction and precedent is binding.

Read sections 4 and 5 of the OFT guidance
Guidance for the Unfair Terms in Consumer Contracts Regulations 1999
https://www.gov.uk/government/uploads/system/uploa...

Then come back and explain why anyone should believe your knowledge of Victorian case law is still relevant to this area and that your knowledge is superior to that of the OFT

[belly2002]

ging84 said:

Read sections 4 and 5 of the OFT guidance
Guidance for the Unfair Terms in Consumer Contracts Regulations 1999
https://www.gov.uk/government/uploads/system/uploa...

Then come back and explain why anyone should believe your knowledge of Victorian case law is still relevant to this area and that your knowledge is superior to that of the OFT

Well I still exist, for one.

You really are a treasure, aren't you. Yes, let me explain and justify myself to you after having spent this much time and effort actually trying to answer with some law in this legal subforum. Or maybe not. I can't be arsed spending any more time.

If you want to know then for one thing, do yourself some research into what the difference is in the meaning of payment by instalments (or 'prepayment') as the guidance you link to calls it, and a deposit.

Then read this out of the very guidance you quote:

OFT guidance said:

A genuine 'deposit'– which is a reservation fee not an advance payment – can quite legitimately be kept in full, as payment for the reservation. But of course such a deposit will not normally be more than a small percentage of the price, otherwise it is liable to be seen as a disguised penalty

and have a think about how much smaller deposit a dealer is likely to set than 1.85%.

Oh, and have another look at the part of my post on page 10 where I refer to victorian caselaw, where I started by saying:

belly2002 said:

1. The general rule is that where money is expressly paid as a deposit (as opposed to making payments by instalment), the deposit is regarded as security for the completion of a purchase.....

Oh, and the bit above where I explained that a (genuine) deposit would usually be forfeited even without any contractual term that might be made void by the regs that guidance is talking about.

And for good measure, why not have a look into what the difference is between black letter law and general guidance issued by government departments is, anyway. (Clue: one of them is law, one of them is not).

I'm oot.

[SpeckledJim]

photosnob said:

What is the consumer was dyslexic and this contract was not fully explained to them? How would this apply to the disability discrimination act?

Someone so lexdystic that they cannot read should know better than to sign pieces of paper without having someone they trust read it to them.

I wouldn't sign a contract offered to me in Mandarin, because I can't read Mandarin.

[ging84]

belly2002 said:

Well I still exist, for one.

I knew someone would bring this st up
That guidance was not archived it is still the current CMA guidance on the subject
The CMA replaced the OFT last year, does not mean everything the OFT ever published is now void

belly2002 said:

OFT guidance said:

A genuine 'deposit'– which is a reservation fee not an advance payment – can quite legitimately be kept in full, as payment for the reservation. But of course such a deposit will not normally be more than a small percentage of the price, otherwise it is liable to be seen as a disguised penalty

and have a think about how much smaller deposit a dealer is likely to set than 1.85%.

You've cut off the opening sentence which is clearly significant

Alternatively, the prepayment may be set low enough that it [b] merely reflects
the ordinary expenses necessarily entailed for the supplier. [/b]

Simply being a small % isn't enough for this to apply in all circumstances, it also needs to merely reflect the sellers expenses

[photosnob]

SpeckledJim said:

photosnob said:

What is the consumer was dyslexic and this contract was not fully explained to them? How would this apply to the disability discrimination act?

Someone so lexdystic that they cannot read should know better than to sign pieces of paper without having someone they trust read it to them.

I wouldn't sign a contract offered to me in Mandarin, because I can't read Mandarin.

You need to read more about the dda. That isn't a legal defence. They have to show they have made a reasonable attempt... Saying he shouldn't buy a car because he isn't good at reading wouldn't not be good enough.

[iamed]

PurpleMoonlight said:

mattmurdock said:

So you strongly disagree with the linked article above?

If the contract contains a term which says the deposit is non-refundable, and the contract is for a sale and not for a service which has not yet happened (i.e. provision of wedding photos, catering etc.) then that term is binding unless there is good reasons for it not to be (i.e. breaches from the selling party).

In reality, the buyer would need to take the seller to court to prove otherwise (with the associated rigmarole you mention above). Unless the contract is extremely badly worded, it is likely the seller would win if they were taken to court. A non-refundable deposit clause is a standard business practice and a standard contractual term, so it would be difficult to argue that it was an onerous or unfair term for a consumer.

You seem to have a very strange view of contract law.

Contract law is you can only claim losses and not levy a penalty.

The buyer would need to prove nothing. It is the dealer that would have to justify their losses.

If the dealer wants to retain the deposit to cover their losses they need to be prepared to justify those losses if sued for the return of the deposit. If they are not prepared to do that they should return the deposit in full.

The point is though that there is no breach of contract as such, so no need to prove losses. There is a pre-arranged agreement to cover what should happen if the buyer does not want to complete the sale - the seller keeps the £500 and it's all within the terms of the contract.

[Jasandjules]

JustinP1 said:

Must admit, I've never heard of someone at the CAB refer to Chitty before!

Half the lawyers won't either.....