Should Deposits Be Refundable?

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    When you pay a deposit on a product or service, you are paying a certain percentage of the total cost up front. If you pay a deposit, it demonstrates that you have the intention of purchasing the item, and it also signifies that you are entering into a contract with the company. When you pay a deposit, you and the company come to the following understanding:

    • the specific good or service that you will be purchasing, the amount of the down payment, the date by which the remaining balance must be paid, and the date on which the good or service will be delivered

    It is of the utmost importance to ensure that you and the company are on the same page regarding all of the specifics. Request a written confirmation that details all of the aforementioned information and includes it in its entirety.

    Make sure that you have a good understanding of the obligations that the company has to you; in particular, confirm the nature of the product and the date on which it will be delivered or made available to you. When you buy something expensive that might have to be made specifically for you, like a piece of furniture, this is something that can be very important to consider.

    Ensure you are both clear about the details, like the colour and style, and ask the business to confirm this in writing on your receipt. If you need advice on your wedding photography, check out our photography packages and services at Wild Romantic Photography.

    If the company informs you that your delivery will be delayed, you should attempt to negotiate a new delivery date that is more practical for both of you. If the product is delivered to you and it is not what you ordered, you need to contact the company as soon as possible so that you can make arrangements to have it changed. In these kinds of circumstances, you are going to need written confirmation as evidence of the things that you ordered.

    FAQs About Photography

    When Can I Ask for a Refund of My Deposit?

    You have a right to ask for your deposit back if:

    • You are unable to come to an agreement on a new delivery date.
    • The newly proposed delivery date is much further in the future than what you had originally agreed upon. The company is unable to meet the newly agreed upon delivery date. The business is unable to provide you with the item that you have chosen to purchase.

    If the business refuses to return your deposit, you may have to take legal action to get your deposit back.

    If I Change My Mind About Buying the Item or Service, Can I Get My Deposit Back?

    Due to the fact that the contract binds both parties, the company is not required to return your deposit in the event that you change your mind. For instance, if you make a deposit with a store in exchange for the proprietor agreeing to hold an item for you and then change your mind about purchasing the item, the store may not be required to return the money you paid as the deposit. If you have signed a contract, the terms and conditions should contain information about the payment of a deposit as well as whether or not you are eligible for a refund.

    What Happens If the Shop Goes Out of Business?

    If you make a deposit on an item and the store that you bought it from goes out of business, it may be difficult for you to retrieve either the item or your deposit. Imagine for a moment that the company is put into either receivership or liquidation. In that scenario, you will be considered a creditor; however, other creditors, such as employees, the Internal Revenue Service, banks, and so on, are more likely to receive payment before you do.

    It would help if you always tried to pay a large deposit using a debit or credit card. If you pay for items using a card, and the shop goes out of business, contact your card provider straight away with details of the transaction and request a chargeback. Check out our range of wedding photography for your wedding day.

    Refundable Deposits

    Definition

    The term "refundable deposits" refers to cash that is collected from credit customers and then expected to be returned by a company after a certain amount of time has passed or when certain conditions have been met. When businesses go to the trouble of collecting this money, they do so with the intention of giving it back after a short amount of time. After the cash has been received by the company, the refundable deposit will be recorded on the balance sheet as a current liability.

    Explanation

    Debts that are due to be paid off within the next year or within one business cycle, whichever comes first, are considered to be current liabilities. Refundable deposits are a component of a larger group of liabilities from advance collections, which is a component of the company's determinable liabilities because it is both known to exist and can be measured precisely. This liability group is a component of the company's determinable liabilities.

    When a business extends credit to a customer without having any information on the customer's creditworthiness, the business will typically collect a refundable deposit as a condition of extending credit to the customer. For instance, it is common practise for utilities to begin providing service before receiving payment. That is to say, a customer of an electric or gas utility pays their bill after they have used the energy that was provided to them. Credit is being extended to the customer by the utility company as a result of this arrangement.

    It is possible for the utility to demand a refundable deposit from the customer in the event that they do not have adequate information to evaluate the customer's credit risk. When it has been established that the customer does not pose a threat of not paying their bills, the utility will either return the deposit or credit the customer's account. In the event that the customer does not pay their bills, the business may apply the deposit towards the unpaid balance of the account.

    When a business receives this payment from a client, there is an increase in cash, and there is also an increase in the current liability refundable deposits that corresponds to this change.

    Can a Deposit Be Non-Refundable?

    Even if something is written in a contract, that does not mean it is always legally binding. In general, businesses are not able to rely on unfair terms, even if they are written in a contract. It is only under certain conditions that businesses have the legal right to keep your deposit or advance payments, or to ask you to pay a cancellation charge. In the event that you cancel the contract, the company has the right, under most circumstances, to retain or receive only an amount that is adequate to cover their actual losses that directly result from your cancellation of the contract. This may include costs that have already been incurred as well as a loss in profit.

    What Is a Non-Refundable Deposit?

    Should Deposits Be Refundable?

    When making a reservation for something, you may be required to pay an advance payment or a portion of the total cost in the form of a deposit. When you cancel your order at a business, they will sometimes insist that it is non-refundable and even write it into the contract. However, this is only possible for a business if the stipulations of the contract are reasonable.

    Before a company begins to perform the requested services, a purchaser may be required to pay a one-time fee known as a non-refundable deposit. If a buyer decides to cancel the service after paying this fee, the fee is not typically refundable to the buyer. As an illustration, a photography company may request that you pay $3000 for their services and additionally pay $600 as a deposit. Because of this fee arrangement, the company is protected in the event that it has a "change of mind." Deposits that are not refundable are used by businesses as an additional layer of protection against the unexpected cancellation of services. It is of the utmost importance to keep in mind that a deposit that is not refundable should be reasonable and protect a legitimate business interest. A non-refundable deposit should not be confused with a sign that says "no refund" displayed by a retailer. In contrast to a deposit that is not refundable, this practise is against the law and violates the consumer protections outlined in the Australian Consumer Law (abbreviated as "ACL").

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    When Does a Non-Refundable Deposit Become an 'unfair' Contract Term?

    When a buyer is made aware of the fee prior to signing the contract, a seller may accept a deposit that is not refundable. Additionally, there should not be any "unfair contract terms" associated with the payment. The buyer shouldn't be penalised by what could be considered a 'unfair' non-refundable deposit, which should be proportionate to the time and money spent by the company. A contract between two parties is considered to be unfair if the terms of the contract significantly favour one of the parties over the other. It is not necessary for all of the terms in a contract to be unfair for the contract to be considered unfair overall. Under the Australian Consumer Law (also known as "ACL"), a single clause might still be considered "unfair." If it is determined that the term violates the spirit of the agreement, it is removed from the contract, and the terms of the agreement continue to be honoured in their absence.

    When Does a Non-Refundable Deposit Amount to Misleading and Deceptive Conduct?

    If a buyer enters into a commercial transaction without first being informed of the existence of a non-refundable deposit, the seller may be guilty of engaging in fraudulent or deceptive behaviour. As a result, the price shouldn't give off a misleading impression that would lead the average consumer to make a poor choice. A claim brought by the Australian Competition and Consumer Commission (abbreviated as 'ACCC') against TPG Internet Pty Ltd (abbreviated as 'TPG') was dismissed by the Federal Court. To provide some context, the Australian Competition and Consumer Commission (ACCC) initiated legal action against TPG in December 2018 for engaging in conduct that was misleading and deceptive and for having unfair contract terms regarding 'prepayments' for terms that were outlined in their telecommunications services.

    For businesses, the main questions to ask are:

    • Is the customer aware that there is a fee for the deposit that is non-refundable?
    • Is there a valid commercial interest being protected by the upfront payment that won't be refunded? (that is, in a manner that is proportional to the amount of time and money spent on the enterprise)

    When Can a Deposit Be Kept?

    In most cases, the company does not have the legal right to keep any portion of the amount that can be saved by acquiring another client or terminating any other suppliers that they currently work with. Under the terms of the Consumer Rights Act, that is most likely going to be considered an unfair contract term.

    For instance, if you made plans to go on a vacation but it ended up selling out before you could go, and the company found another customer to go in your place, it's likely that the only amount it can legally deduct from your deposit is the amount needed to cover administrative costs. On the other hand, if you cancel with an extremely short notice and the company is unable to find another customer to take your spot, you should expect the company to keep the majority of, if not all of, your deposit.

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    Was it a Genuine Reservation Fee?

    It is possible that the company will keep the deposit you paid as a payment for that reservation if the fee you paid for the reservation was a genuine and reasonable reservation fee rather than an advance payment. However, it is essential to note that such deposits will never constitute more than a negligible portion of the total cost in any circumstance.

    Do I Have to Pay a Cancellation Charge?

    A cancellation charge is very comparable to a deposit; the main difference is that rather than making a payment up front, you make a commitment to pay a fee in the event that you cancel the contract. However, the fact that it is written in the contract that you signed does not automatically make it fair. If you are required to pay a fee for cancelling your reservation, it must be fair and reasonable.

    Cancellation fees should be a reasonable approximation of the actual losses incurred by the company. Before agreeing to the terms of a contract and making a financial commitment, it is in your best interest to investigate the cancellation fee and determine the circumstances under which it would be imposed.

    When Is a Deposit Truly' non-refundable?

    The phrase "non-refundable deposit" is frequently utilised by proprietors of commercial enterprises; however, merely because a deposit is referred to as "non-refundable" does not guarantee that it is in fact non-refundable. On the other hand, if certain conditions are met, a deposit that was previously paid may no longer be refundable to the customer.

    Meeting the Non-Refundable Criteria

    When charging a non-refundable deposit, owners of businesses have a responsibility to exercise caution and ensure that the arrangement satisfies all of the necessary requirements. The purpose of non-refundable deposits is to both protect a company in the event that an unexpected cancellation occurs and compensate the company for the amount of time, effort, and money that has already been invested up to that point. Because of this, a company has a responsibility to make certain that the non-refundable deposit they demand from a customer or client under these conditions is reasonable and proportionate to the task of protecting their legitimate business interests. Additionally, the deposit cannot be excessive or used as a "penalty" against the customer or client in question. What factors into what is considered reasonable and proportionate will depend on the particulars of the situation at hand, and the answers will vary from one instance to the next.

    Documenting the Deposit Correctly

    A company has not only the responsibility of ensuring that a non-refundable deposit is reasonable and proportionate in light of the circumstances, but also the responsibility of ensuring that they disclose all pertinent information regarding the non-refundable deposit to their customers or clients. A company has a responsibility to accurately disclose the terms of the non-refundable deposit; failing to do so may give the appearance that the company is engaging in conduct that is misleading or deceptive, both of which are illegal.

    At a bare minimum, the company is required to make the terms of a non-refundable deposit clear to the customer or client in a document titled "Terms and Conditions" (or something similar) that is given to them at the time of engagement or before they engage the company.

    Even better, the company should also try to get the client or customer to acknowledge that the non-refundable deposit is reasonable and proportionate in protecting the company's legitimate business interests. This would be a win-win situation for everyone involved. Again, the Terms and Conditions document that the company uses can be updated to include this information. You can also reiterate this to the client or customer when you request the deposit's payment. Transparency is key! At Wild Romantic, we have the best wedding photographer in Mornington Peninsula to capture every single moment on your wedding day.

    But How Does It Work in Real Life?

    Should Deposits Be Refundable?

    A company has not only the responsibility of ensuring that a non-refundable deposit is reasonable and proportionate in light of the circumstances, but also the responsibility of ensuring that they disclose all pertinent information regarding the non-refundable deposit to their customers or clients. A company has a responsibility to accurately disclose the terms of the non-refundable deposit; failing to do so may give the appearance that the company is engaging in conduct that is misleading or deceptive, both of which are illegal.

    At a bare minimum, the company is required to make the terms of a non-refundable deposit clear to the customer or client in a document titled "Terms and Conditions" (or something similar) that is given to them at the time of engagement or before they engage the company.

    Even better, the company should also try to get the client or customer to acknowledge that the non-refundable deposit is reasonable and proportionate in protecting the company's legitimate business interests. This would be a win-win situation for everyone involved. Again, the Terms and Conditions document that the company uses can be updated to include this information.

    • Whether or not the non-refundable nature of the deposit is adequately explained in the Terms and Conditions;
    • Whether or not you have effectively engaged your client or customer (by giving them a copy of the Terms and Conditions and confirming that they have read and accepted them);
    • Whether or not the amount of the non-refundable deposit is reasonable, taking into consideration the actual costs that your company has incurred (which may include things such as the amount of time spent making the booking, the potential loss of profit if you are unable to re-book the session, and any other costs that you have incurred, etc.), and whether or not the deposit itself is non-refundable; and
    • Check to see if the amount of the non-refundable deposit is reasonable in relation to the total cost of the product or service that you offer.

    It would appear, based on the facts presented above alone, that the deposit would be non-refundable, as the document requirements appear to have been met, and $100 may likely be considered to be a reasonable and proportionate amount to pay as a deposit. This is despite the fact that no additional information has been presented.

    The Consequences 

    What are the repercussions of a company that fails to disclose the conditions of a deposit that is non-refundable or that does not take the time to ensure that the amount they are charging is reasonable and proportionate? It is possible that the customer or client has the right to get that deposit back, and the company will not be allowed to be compensated for the loss they have suffered as a result of the amount of time, effort, and costs that have been incurred up until that point.

    Challenge Unfair Terms

    The Competition and Markets Authority (CMA) advises businesses to consider the following to avoid potential challenges of unfair terms from customers:

    • A deposit is not more than a modest portion of the overall cost of the product or service, and it is required in order to hold the reservation.
    • Customers are still left with a reasonable amount to pay after the completion of the transaction because advance payments cover some of the company's expenses.
    • Customers do not lose large advance payments if they cancel, and it is always recommended that businesses set sliding scales of cancellation charges in order to cover their likely losses directly from the cancellation. Customers do not lose large advance payments if they cancel their subscriptions.

    What Every Business Should Do

    Imagine that you are the owner of a company and that you want to implement a non-refundable deposit policy. If this is the case, you should consult with an attorney who specialises in commercial law regarding the creation of your Terms and Conditions, as well as the determination of whether or not the price you intend to charge is reasonable. Unfortunately, this is another circumstance in which you cannot use terms that you have sourced from Google because they are not customised to your business, which will affect the likelihood of the provisions being enforced. Since these terms are not customised to your business, you cannot use them.

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    Businesses are allowed to use deposits that are not refundable provided that the buyer is given sufficient warning prior to the beginning of the transaction. In addition, the sum in question should be reflective of a genuine business interest. As a result, the deposit charge should not "penalise" customers and should not be significantly disproportionate to the actual costs incurred by the business and the amount of time spent on the provision of the services. To avoid any potential disputes or the possibility of incurring severe penalties, businesses need to maintain vigilance and ensure that they continue to comply with consumer regulation. We recommend that businesses seek individualised counsel and assistance from one of the Consumer Lawyers who can cater to the specific requirements of their operations.