Confirmatory deposit And advance payment They are not the same thing. They perform different functions
In practice at the time of conclusion of a contractfor example of purchase of property, furniture, residential and commercial rent, purchase of hotel rooms, travel reservations, self-employed medical treatment, contract for the supply of goods or services, etc. it is expected the giving of a sum of money.
There are several effects that ensue in the event that the sum is paid as an advance, deposit or penalty. We talk to thelawyer Nicola Ferrarofounder partner of de Tilla Studio Legale.
Attorney Ferraro, we often hear about down payments and confirmation deposits. What is the difference?
Confirmatory deposit And advance payment They are not the same thing. They perform different functions. Effect common to both is to book the conclusion of the contract desired by the parties. The difference arises when one of the two parties does not intend to proceed with it. In the event that a sum has been paid as an advance, it must be returned to the partyeven if defaulted, and cannot be held.
The reason is intuited: since it is an advance payment for the purchase of the good, the service, the provision in the absence of these, the legal cause that led to the donation is lost.
The hypothesis in which the payment has taken place by way of is different confirmatory deposit. In this case, the non-defaulting party has the right to keep it (if it was paid by the other party) or to demand double payment (if it was she who paid it to the other party who was found to be in default).
Explain to us better how the deposit works
In the first instance, the sum paid (but the service may also concern fungible items) is charged by the parties as an advance on the excess amount due as consideration for the good or service purchased.
However, upon occurrence ofdefault of one of the two parties, the deposit turns into one advance liquidation of the damagein the amount that has been determined by the parties, on a flat-rate basis and in advance.
How it works can be summarized as follows: if the party who paid the deposit defaults, the other has the right to withdraw from the contract and keep what was delivered.
If the party that received the deposit defaults, the other party has the right to withdraw from the contract and demand double the amount delivered.
Is the object of the deposit only a sum of money?
No, the deposit can have as its object a sum of money, as in practice more often happens or also other fungible things.
The effects of the deposit, however, are produced only with the physical delivery of the sums or of the fungible things that constitute its object. The relief is not insignificant because it has significant practical effects.
Let’s take the case ofBank check. A bank check is a title that legitimizes the person in whose favor it is issued (beneficiary) to bring it to collection (go to the bank to receive the sum indicated therein).
However, for the effects of the deposit, the mere delivery of the check is not sufficient; but the collection of the sum by the beneficiary is necessary.
Basically, the receiver who, after accepting delivery, does not collect the check, in the event of default by the other party, cannot withdraw from the contract and retain the sum indicated therein.
Is there an alternative to the protection offered by the deposit?
Certainly, and it is foreseen by the legal system. Only that it requires a necessary ruling by the judge. The deposit entitles the fulfilling party to withdraw from the contract, i.e. to release himself from it by asserting a right provided by law without going to court.
In point of damage, it resolves to one lump sum payment its (indemnity), as the one who received it has the right to keep it, the one who gave it to demand the return of double if the other party is in default.
Instead, in case of failure to provide the depositthe fulfilling party will not be able to freely release himself from the contract but will have to take legal action to hear the judge pronounce his resolution.
In the event that he complains of having suffered damage, he will be able to claim full compensation – and not a lump sum – but he will have to provide the relative proof in court.
Naturally, the different and opposite case may occur in which, faced with the non-fulfilment of the counterparty, the party who is in compliance has an interest in the conclusion of the contract anyway.
Which can occur, returning to examples widespread in practice, in the case of stipulation of a preliminary contract for the purchase of real estate or with the booking effects of a future lease, when the interest in the purchase and in the lease are greater than that of withdrawing from it by receiving, as compensation, the payment of a limited and lump sum.
In this case, the party who is ready to enter into the contract but suffers the non-fulfilment of the other can apply to the judge to ask him to pronounce a sentence that produces the same effects as the unconcluded contract (for example those of the sale or lease that the other party has refused to stipulate).
In practice, the judge takes the place of the parties causing the same effects of the contract that they had undertaken to conclude.
If then the risk is that one of the two parties may default on a contract, why not stipulate it immediately? Why has the use of the preliminary contract taken root?
The stipulation of preliminary agreement may depend on multiple needs: for example, because the buyer intends to purchase the asset by resorting, for the payment of the price, to a bank loan with subsequent preliminary investigation by the credit institution, because the seller needs to carry out urban planning updates or cadastral, or also for his housing needs, because the buyer intends to have the effects produced by a third party, because the parties want to be definitively bound only upon the occurrence of certain conditions.
In essence, the foreplay has the effect of reserve the effects of the contract that the parties intend to sign, keeping them bound to its conclusion. In all these hypotheses, the payment of the deposit strengthens the commitment of the parties.
When will the signing of the final contract the provisions of this will replace those contained in the preliminary contract and the definitive contract will constitute the only source of the rights and obligations inherent in the desired transaction.
However, unless the final contract completes the contractual obligations envisaged in the preliminary contract and that the parties have foreseen the persistence of the effects even after the signing of the final contract.
It is therefore very important that at the time of signing the final contract, the parties are careful in transferring all the obligations envisaged in the preliminary contract to it or in preserving the effects of it not exhausted in the final contract.
Instead, when we talk about criminal law what should we refer to?
The criminal it has the effect of limiting the damage resulting from the default of one of the parties to the amount pre-established by them. It could therefore appear, at first glance, that the penalty and the confirmatory deposit are the same thing. It is not so.
They have different fields of application: the first is applied in the event that the non-defaulting party, faced with the default of the other, does not intend to withdraw from the contract, but to request its execution or termination and, at the same time, ask for liquidation of the damage to the predetermined extent.
There confirmatory deposit, on the other hand, is applied in the event that, in the event of a breach by one party, the other loses interest in concluding the contract and exercises the right of withdrawal provided for by law. In this case, the liquidation mechanism indicated above applies. So, penalty and confirmatory deposit can coexist in the same contract.
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