If someone gives me a deposit on a car and signs a contract but then backs out, doI have to refund the money?

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If someone gives me a deposit on a car and signs a contract but then backs out, doI have to refund the money?

Asked on January 5, 2012 under Business Law, Massachusetts

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

Normally, a deposit given to hold an item for sale--such as a deposit on a car--is not refundable when it is the buyer who backs out of the sale or otherwise breaches the contract of sale. In those cases, the seller gets to keep the deposit as damages for the breach.

Deposits are returned when (1) it was the seller who backed out; (2) the sale became impossible due to the fault of neither party (for example, a tree fell on and wrecked the car); or (3) the agreement of sale itself said the deposit was refundable under certain circumstances, and those circumstances occured.


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