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Ben Jones
Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 50161
Experience:  Qualified Solicitor
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Can the funds of a contract of sale be non-refundable if contracts

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Can the funds of a contract of sale be non-refundable if contracts have not been exchanged?
Hello, my name is***** am a qualified solicitor and it is my pleasure to assist you with your question today. Can you please explain your situation in a bit more detail?
Customer: replied 2 years ago.
Hi Ben,I invested some money in a company who sell car parking spaces and the amount I invested was £200k. I recently asked for £80k back as I am in need of funds but the company have said that I cannot have any funds back because the contract of sales states it is a non-refundable deposit.But the thing is the contracts have not been signed and exchanged. Therefore I would like to know if the "non-refundable deposit" can be refunded to me because the contracts have not been signed or exchanged.
Do you mean that the contract between you and the company, which contained this clause, was not signed and exchanged?
Customer: replied 2 years ago.
Hi Ben,This part has been signed but the proper contracts which are with the solicitors which need to be signed and exchanged have not been done as yet.
It is possible to have a clause for a non-refundable deposit, which could apply even before the end contracts have been exchanged. Just as a simple comparison, when you buy a car you may place a deposit which is described as non-refundable and could potentially lose it even before any contract of sale is exchanged or signed. However, that does not automatically mean that the other party can enforce such a clause and just keep the deposit. There is still the principle of this potentially being a penalty clause, which in law is unenforceable. Generally, when a person pays a deposit they enter into a legally enforceable contract with the other you want to proceed with the contract. Unless they subsequently commit a serious breach of contract, or there was a cancellation clause, you would have no legal right to cancel the agreement and if you do so you will be acting in breach of contract and risk losing your deposit. This is especially true if the deposit was described as non-refundable. However, as mentioned if such a clause amounts to a penalty then it can become unenforceable in law. A penalty clause is one where the party tries to charge or keep a sum of money, when they have not suffered damages or losses equivalent to that amount. They could keep all or part of the deposit to cover any damages they have incurred as a result of you not proceeding with the contract but they cannot just keep it and make a profit out of it, if they have not suffered the damages they are trying to cover for. Some further reading here: This is your basic legal position. I have more detailed advice for you in terms of the exact steps you need to follow if you wanted to take this further and try to recover the deposit, which I wish to discuss so please take a second to leave a positive rating for the service so far (by selecting 3, 4 or 5 stars) and I can continue with that and answer any further questions you may have. Don’t worry, leaving a rating will not close the question and we can continue this discussion. Thank you
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Customer: replied 2 years ago.
So how can I go about getting some of my funds back? I do not want to withdraw from the full investment out and only need some of the funds back. In the contract of sale, it does not mention that it is a deposit and just mentions it as the capital amount invested. I have read some where that I am not legally bound to buy the property if the contracts have not been exchanged.
Thank you for te earlier rating. Whenever a dispute arises over money owed by one party to another, the debtor can be pursued through the civil courts for recovery of the debt. As legal action should always be seen as a last resort, there are certain actions that should be taken initially to try and resolve this matter informally and without having to involve the courts. It is recommended that the process follows these steps: 1. Reminder letter – if no reminders have been sent yet, one should be sent first to allow the debtor to voluntarily pay what is due. 2. Letter before action – if informal reminders have been sent but these have been ignored, the debtor must be sent a formal letter asking them to repay the debt, or at least make arrangements for its repayment, within a specified period of time. A reasonable period to demand a response by would be 10 days. They should be advised that if they fail to do contact you in order to resolve this matter, formal legal proceedings will be commenced to recover the debt. This letter serves as a ‘final warning’ and gives the other side the opportunity to resolve this matter without the need for legal action. 3. If they fail to pay or at least make contact to try and resolve this, formal legal proceedings can be initiated. A claim can be commenced online by going to Once the claim form is completed it will be sent to the debtor and they will have a limited time to defend it. If they are aware legal proceedings have commenced it could also prompt them to reconsider their position and perhaps force them to contact you to try and resolve this. Whatever correspondence is sent, it is always advisable to keep copies and use recorded delivery so that there is proof of delivery and a paper trail. The court may need to refer to these if it gets that far. I cannot comment on the specifics of the contract as it will be specific to property law transaction and you need to get some advice from or Property Law section on that. Best regards