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The difference between a confirmatory and a penitential deposit

When you sign up for or receive a purchase offer, it is good to know what you are agreeing to sign. Especially when there are tens of thousands of Euros involved and when the sale of a property is at stake. If you want to avoid unnecessary legal disputes, read this short article and learn the differences between a confirmation deposit and a penitential deposit.

In this article you will find information on the various types of deposit and in which cases it is best to use them.

Let's start with the definitions:

What is the deposit?

When an agreement is reached for the sale of a house, it is good practice (but not mandatory) to sign a preliminary sale agreement and pay the owner of the property a sum of money to guarantee the deal.

This payment can take various names according to the modalities in which it is considered between the parties.


Confirmation deposit pursuant to art. 1385 cc

According to the civil code, the deposit is "a sum of money or a quantity of other fungible things" that is paid at the conclusion of the contract (in this case the preliminary).

The confirmatory deposit is intended to protect the parties in case of non-fulfillment. In fact, as the code states:

"If the party who gave the deposit is in default, the other can withdraw from the contract, retaining the deposit; if the party who received it is in default, the other can withdraw from the contract and demand double the deposit. "

Well I knew that too !! You must be thinking …

However, the article of the civil code does not end here, the advantage of attributing the deposit paid as confirmation is that in the event of non-fulfillment by one of the two parties, whoever intends to continue with the sale can request the execution of the contract or even the compensation of the damage.

Let's say a buyer who pays a deposit and then later decides not to buy the house, the seller is convinced that he has concluded his deal, perhaps he has committed himself to the purchase of another property or has started the move or confirmed a house in rent. In this situation, economic damage can be generated that can go well beyond the value of a deposit. This is why it is allowed by law to be able to ask for the greatest damage. (the same reasoning can apply if the seller does not want to continue with the sale).


The penitential deposit art. 1386 cc

Unlike the previous one, which is intended to protect the non-fulfillment of one of the parties, the penitential deposit is paid precisely with the intention of agreeing on a "grave" right of withdrawal.

In fact, the article reads:

"If the right of withdrawal is stipulated in the contract for one or both parties, the deposit has the sole function of compensation for the withdrawal. In this case, the withdrawing party loses the deposit given or must return double the amount received."

there is no longer the part relating to the greater damage or the possibility of requesting the execution of the contract.

a simpler and smoother way out.

Definitely:

CONFIRMATORY DEPOSIT: If one of the two withdraws, the counterparty can (through a court case) force the other party to conclude the contract or ask for greater damage than agreed.

If the buyer withdraws = loss of the deposit
If you withdraw the seller = refund of double the deposit
PENITENTIAL DEPOSIT: It is a sort of "penalty" and allows the parties to withdraw without legal consequences. As for the confirmation

If the buyer withdraws = loss of the deposit
If you withdraw the seller = refund of double the deposit

Do you need advice to conclude a sale? Contact me!

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