Deposit is way to ensure fulfilment of obligations

Extracts for legal literacy News

Currently, almost none expensive purchase of movable/immovable property is made without a deposit. First of all, this concerns the acquisition of apartments, houses, cars, land plots, etc. One of the ways to ensure the fulfilment of obligations under a future transaction is a deposit.

According to the norms of the Civil Code of the DPR, a deposit is recognized as a sum of money issued by one of the contracting parties on account of payments due from it under the contract to the other party, as evidence of the conclusion of the contract and ensuring of its execution.

In accordance with Article 473 of the Civil Code of the DPR, an agreement on a deposit, regardless of the amount of the deposit, must be made in writing.

In case of doubt as to whether the amount paid on account of payments due from the party under the contract is a deposit, in particular due to non-compliance with the rule established by paragraph 2 of the article, this amount is considered paid as an advance, unless the contrary is proved.

Unless otherwise provided by law, a deposit may secure the fulfilment of the obligation by agreement of the parties to conclude the main contract on the terms stipulated by the preliminary contract (Article 531).

The legal consequences of termination and failure of fulfilling of the obligation secured by a deposit are regulated by Article 474 of the Civil Code of the DPR.

Thus, when the obligation is terminated before the start of its execution by agreement of the parties or due to the impossibility of performance (Article 518), the deposit must be returned. If the party that gave the deposit is responsible for non-performance of the contract, it remains with the other party. If the party that received the deposit is responsible for non-fulfilment of the contract, it is obliged to pay the other party the double amount of the deposit. Moreover, the party responsible for non-fulfilment of the contract is obliged to pay damages to the other party for losses with the amount of the deposit, unless the contrary is proved.

It should be noted that the obligation is terminated by the impossibility of performance if it is caused by a circumstance that occurred after the occurrence of the obligation, for which none of the parties is responsible. If it is impossible for the debtor to fulfil the obligation caused by a fault of the creditor, the latter does not have the right to demand the return of what the party fulfilled under the obligation (Article 518 of the Civil Code of the DPR).