For a private car sale, is a deposit automatically refundable if it doesn’t state otherwise?

UPDATED: Mar 5, 2011

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For a private car sale, is a deposit automatically refundable if it doesn’t state otherwise?

I was selling a car on Ebay. The buyer ended the auction early 4 days early utilizing the “Buy it Now” option thereby taking the many other active bidders out of the auction. He immediately submitted the deposit via Paypal. He arrived 8 days later to pay for the car but said that he didn’t want it. He never opted to check it out before he used the Buy it Now option. I did not specify that the deposit was non-refundable. Do I have to give him a refund? We took off work early to meet him and he got cold feet. Now he’s threatening to sue for the deposit $500.

Asked on March 5, 2011 under General Practice, Maryland


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Actually, to the contrary, a deposit is normally *nonrefundable* if the reason a sale or other transaction did not go through was the buyer's choice or due to his actions. The purpose of a deposit, after all, is to encourage the buyer to not play games with the seller by forcing him to have "skin in the game" and putting him in a position to lose the deposit if he backs out of the transaction. Normally, you'd have to state that the deposit *is* refundable for it to be refundable in a situatio like this. Note, however, that if you had caused the sale to fall through--e.g. you sold the car to someone else--then you'd have to refund it; the seller can't kill the deal and keep the money, but he can typically keep the money when its the buyer who terminates it.

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