Adem Esen from local solicitors Wiseman Lee talks about deposits, and more importantly, about non-refundable deposits, which can sometimes be based on unfair small print
Our personal diaries are blank. We have all had to cancel planned holidays and events, and we know that, in some cases, the cancellation and refund process works more smoothly than in others.
One of the main concern consumers face is whether it is legal for a business to keep a non-refundable deposit in the event of a cancelled event due to Covid-19.
A deposit is part of the total cost of something, or an advance payment paid at the time of booking. Businesses will sometimes insist that it’s non-refundable if you cancel, and even draft it into its contract and terms and conditions. A common example of this is when booking a venue for an event, such as a wedding. The business’s contract and terms and conditions will very often refer to all payments made in respect of the event as ‘non-refundable and non-transferable’.
Can a deposit be non-refundable?
Just because something is written in a contract does not mean it is always legally binding. The reason for this is because businesses ordinarily cannot rely on unfair terms.
Only in some circumstances can a business keep your deposit or advance payments. If you cancel the contract, the business is generally only entitled to keep or receive an amount sufficient to cover actual losses that directly result from your cancellation. This will generally include costs already incurred by the business or loss of profit.
When can a deposit be kept?
Generally, the business has no entitlement to keep any amount that can be saved by finding another customer, or cancelling any other suppliers they have employed. That would likely constitute an unfair contract term. For example, if you booked a holiday which then sells out and the company finds another customer to take your place, it is likely the only amount it can legitimately withhold from your deposit will be administrative costs. However, if you cancel at unreasonably short notice and the business cannot find another customer, you could expect the business to keep most, if not all, of your deposit.
Was it a genuine reservation fee?
If the deposit you paid was a reasonable and genuine reservation fee and not an advance payment, it may be kept by the business as a payment for that reservation. But, importantly, in most cases, such deposits will only ever be a small percentage of the overall price.
Wiseman Lee is located at 9–13 Cambridge Park, Wanstead, E11 2PU. For more information, call 020 8215 1000