What is a deposit?
Let's start with the fact that a deposit is one of the forms of securing the fulfillment of an obligation.
Therefore, the deposit agreement has no independent value, without the underlying obligation. There will be no main obligation - accordingly, the deposit condition will not apply. In this case, the condition for the deposit may be contained both in the text of the contract of the main obligation, and in an independent separate agreement on the deposit. Thus, the deposit plays a supporting role, aimed at ensuring the fulfillment of the obligation.
The law provides a legal definition of a deposit.
Article 380 of the Civil Code provides:
A deposit is recognized as a sum of money given by one of the contracting parties in payment of payments due from it under the contract to the other party, as proof of the conclusion of the contract and to ensure its execution.
The deposit can only be made in writing. In this case, the deposit is, as it were, “two-sided”. That is, it serves to secure the obligations of both one party to the contract and the other. This idea is expressed in Article 381 of the Civil Code, which establishes that the party who gave the deposit, as a liability for failure to fulfill the main obligation, loses the deposit. The party who received the deposit, as liability for failure to fulfill the obligation, is obliged to return the deposit in double amount.
The deposit can only be a monetary amount, as this is provided by law. In addition, the law (Article 380 of the Civil Code of the Russian Federation) states that the deposit is proof of the conclusion of the contract and ensures its execution. As for execution, there are no questions here. As for the deposit as evidence of the conclusion of an obligation, I would argue here.
However, not every obligation can be secured with a deposit. For example, I can’t imagine how you can secure an obligation as a result of harm with a deposit.
Deposit and advance. A fine line
Obligatio est juris vinculum
Obligation is the shackles of law,
by virtue of which we must of necessity
perform a known action according to
laws of our state
In accordance with civil law, an obligation is a legal relationship between subjects of law, where one person (debtor) is obliged to perform a certain action in favor of another person (creditor) or to refrain from performing an action, and the other party, that is, the creditor, has the right to demand from the debtor the fulfillment of the obligation. they have obligations, and the law provides the creditor with different ways to protect this right. However, the law protects not only the creditor, but also the interests of the debtor, fairly balancing the interests of interacting persons.
The Code of Civil Laws of the Russian Empire knew only four ways to ensure the fulfillment of obligations: “Contracts and obligations by mutual consent can be strengthened and secured: 1) by surety; 2) the condition of the penalty; 3) pledge of real estate; 4) mortgage of movable property” (Article 1554). The legislator was also taciturn in Soviet codes. Yes, Art. 186 of the Civil Code of the RSFSR of 1964 practically repeated the wording of the Code, adding only a deposit and a guarantee to the list of methods.
The current civil code establishes six methods of fulfilling obligations: 1) penalty, 2) pledge, 3) retention, 4) surety, 5) bank guarantee, 6) deposit. This list is not exhaustive, since the law or contract may provide for other ways to ensure the fulfillment of obligations (clause 1 of Article 329 of the Civil Code of the Russian Federation). In the doctrine, methods of ensuring the fulfillment of an obligation are called accessory, that is, additional, since they depend on the fact of violation of the main obligation.
Let us consider the essence and main features of such methods of ensuring the fulfillment of an obligation as a deposit and an advance.
A deposit is recognized as a sum of money given by one of the contracting parties against payments due from it under the contract to the other party, as proof of the conclusion of the contract and to ensure its execution (Article 380 of the Civil Code of the Russian Federation).
The essence of the deposit is that:
1) upon termination of the obligation before the start of its execution by agreement of the parties or due to the impossibility of execution (Article 416 of the Civil Code of the Russian Federation), the deposit must be returned;
2) if the party that gave the deposit is responsible for the failure to fulfill the contract, it remains with the other party;
3) if the party that received the deposit is responsible for failure to fulfill the contract, it is obliged to pay the other party double the amount of the deposit;
4) the party responsible for failure to fulfill the contract is obliged to compensate the other party for losses with the amount of the deposit offset, unless otherwise provided in the contract;
5) in case of doubt as to whether the amount paid towards 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 Art. 380 of the Civil Code of the Russian Federation, this amount is considered paid as an advance unless otherwise proven.
The law establishes that an agreement on a deposit, regardless of its amount, must be drawn up in writing (clause 2 of article 380 of the Civil Code of the Russian Federation). Therefore, depending on the will of the parties, an agreement on a deposit can be included in the text of the contract, drawn up as an additional document to the contract, concluded through the exchange of documents between the parties using various types of communication, or in the form of payment by the person who received the offer within the period established for its acceptance, the corresponding sum of money (in accordance with Article 447 of the Civil Code of the Russian Federation, any agreement, unless otherwise follows from its essence, can be concluded through bidding; the notice of such bidding indicates the amount, timing and procedure for making a deposit by bidding participants If the auction does not take place, the deposit must be returned; it is also returned to persons who participated in the auction but did not win it (Clause 4 of Article 448 of the Civil Code of the Russian Federation).
In paragraph 3 of Art. 380 of the Civil Code of the Russian Federation, the legislator indicates that in case of doubt as to whether the amount paid towards 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 Art. 380 of the Civil Code of the Russian Federation, this amount is considered paid as an advance unless otherwise proven. However, the law does not reveal the meaning of the advance, proposing to proceed from the opposite, that is, a deposit.
In general, a deposit and an advance have common features, but there are significant differences between them.
First, as noted above, the deposit agreement must be in writing. The Civil Code of the Russian Federation does not contain special requirements for the form of an advance agreement. However, in paragraph 3 of Art. 380 of the Civil Code of the Russian Federation states that if the written form of the deposit agreement is not observed, the amount paid towards payments due under the contract is considered an advance, unless otherwise proven. That is, an advance agreement can be concluded orally (Article 159 of the Civil Code of the Russian Federation). But according to paragraph 2 of Art. 161 of the Civil Code of the Russian Federation, a simple written form of an advance agreement is mandatory for individuals if the amount of the advance exceeds 10 minimum wages, and for legal entities - regardless of the amount of the transaction (Article 808 of the Civil Code of the Russian Federation). Failure to comply with this norm deprives the parties of the right in the event of a dispute to refer to witness testimony to confirm the transaction and its terms, but does not deprive them of the right to provide written and other evidence (clause 1 of Article 162 of the Civil Code of the Russian Federation).
Secondly, the advance payment upon termination of an obligation before the start of its execution may not be returned if the party that received it has already incurred some legitimate expenses for this obligation. And if the parties have drawn up an agreement on a deposit, then if the obligation is terminated before the start of its execution by agreement of the parties or due to the impossibility of its execution (Article 416 of the Civil Code of the Russian Federation), the deposit must be returned.
Thirdly, if the party who received the deposit is responsible for the failure to fulfill the contract, he is obliged to pay the other party double the amount of the deposit. An advance is not a way to ensure the fulfillment of obligations and proof of the conclusion of an agreement, but only performs a payment function. In all cases of non-fulfillment of the contract, the party that issued the advance has the right to demand its return in a single amount. In this case, the party guilty of disrupting the transaction does not bear any sanctions, with the exception of the situation where the parties in the advance agreement provided for the payment of a penalty (Articles 330, 331 of the Civil Code of the Russian Federation).
Fourthly, refusal to return the advance is recognized as unjust enrichment, subject to return in accordance with paragraph 1 of Art. 1102 of the Civil Code of the Russian Federation. Since payment of an advance is a monetary obligation, according to clause 1 of Art. 395 of the Civil Code of the Russian Federation, the party evading its return is liable for the unreasonable use of someone else’s funds in the form of paying interest on the amount of these funds. The amount of interest is determined by the bank interest rate existing at the place of residence of the creditor on the day of fulfillment of the monetary obligation. When collecting a debt in court, the court may satisfy the creditor's claim based on the discount rate of bank interest on the day the claim was filed or on the day the decision was made. The above rules apply unless a different interest rate is established by law or agreement.
In practice, there are often restrictions on the use of deposits in relations related to the alienation of real estate. Thus, the legislator identifies several groups of agreements that are considered concluded only from the moment of their state registration (for example, real estate purchase and sale agreements). As a rule, the parties first agree on the property and enter into an agreement, but it will be legally concluded only after state registration. That is, if the parties include a condition for a deposit in the contract, then it comes into force only after state registration, and payment of the deposit amount made before state registration will not have consequences in the form of a sanction provided for in paragraph 2 of Art. 381 Civil Code of the Russian Federation. This rule will also apply to relations arising from lease agreements concluded for a period of more than a year, since lease agreements concluded for a shorter period are not subject to state registration.
To exclude such a situation, the parties need to formalize the terms of the deposit in a separate document that is not subject to state registration, which will come into force from the moment it is signed (for example, a preliminary contract for the purchase and sale of real estate).
Based on the above, it is obvious that an advance is beneficial for the seller, but not for the buyer. So, if the transaction does not take place due to the fault of the seller, then he will be obliged to return double the amount to the buyer. But the buyer also needs to be, as they say, “on guard,” because if the deal falls through due to his fault, he will not be able to demand the return of the deposit.
It is worth keeping in mind that registering the amount due under the contract in favor of the buyer in advance is very beneficial to unscrupulous sellers. So, for example, they can enter into preliminary agreements for the purchase and sale of real estate with different buyers, draw up an amount that ensures the fulfillment of the obligation on the part of the buyer in advance (usually at least 10% of the cost of the property), thereby receiving at their disposal not small amounts. The purpose of such a scheme can be the cheap use of other people’s money by several “buyers” at once (such use will be paid only if the buyer goes to court demanding the application of Article 395 of the Civil Code), because the seller cannot sell the same thing to several buyers at once an object. Consequently, the deal “breaks down” due to the fault of the seller, and he returns the advance payment to the would-be buyers without experiencing any sanctions. In this case, an agreement on a deposit is a reliable way to ensure the fulfillment of obligations arising from the contract, because even if the transaction does not take place due to the fault of the other party, the person who transferred the deposit will be able to compensate for their losses and lost time.
Mikhalchuk Yu. S.
What is an advance?
Let's move on to the advance. The Civil Code does not define the term advance. However, this is not necessary, since advance means a simple prepayment.
Let me give you a few examples for clarity.
- A purchase and sale agreement has been concluded. According to the terms, the buyer is required to make an advance payment. There will be no delivery until the advance payment is made.
- A purchase and sale agreement has been concluded. The seller handed over the goods to the buyer. The buyer made partial payment two days later. And a week later I made the final payment for the goods.
- A purchase and sale agreement has been concluded. According to the contract, payment must be made in full before delivery of the goods. The buyer made an advance payment in the amount of half the payment amount. A week later, full payment for the goods was made. After this, delivery was carried out.
In each of the examples, the buyer did not immediately make full payment for the goods, i.e. made an advance payment. In the second example, it is a little incorrect to talk about prepayment. But it is still a stretch to talk about prepayment before the final payment.
If you think about it, in fact, any partial payment for goods can be considered an advance. In this case, the terms of the contract may provide for the procedure according to which prepayment (advance payment) must be made before delivery.
Thus, an advance can be used as a condition for the other party to begin fulfilling an obligation.
I believe that it would be correct to call advance payment precisely the prepayment that is provided for in the contract as a condition for the beginning of the fulfillment of the obligation by the other party. In other cases, I believe that it would be correct to talk about partial fulfillment of a monetary obligation. But these features are not fundamental and do not require separate regulation.
Article 487 of the Civil Code of the Russian Federation. Advance payment for goods (current version)
1. The purchase and sale agreement may provide for advance payment for the goods, that is, payment for the goods in full or in part before the moment of its transfer. In this case, the buyer is accordingly obliged to fulfill this condition and pre-pay for the goods. The deadline for fulfilling such an obligation must be stipulated in the purchase and sale agreement. If it does not provide for such a period, then the goods are pre-paid on the day the purchase and sale agreement is concluded.
Also, if the period for advance payment for the goods has not been established, then this must be a reasonable period, that is, the period during which the buyer can objectively make an advance payment for the goods (see Resolution of the Federal Antimonopoly Service of the Central District dated October 17, 2005 N A35-7373/03-C22) .
If the buyer refuses to pre-pay for the goods, the seller has the right to refuse to fulfill the sales contract and demand compensation from the seller for damages caused.
If, after prepayment of the goods, the seller refuses to transfer it, then the buyer has the right to demand the transfer of the goods or the return of the prepayment amount.
In addition, interest may be charged on the amount of prepayment after which the seller does not transfer the goods in accordance with civil law.
2. Applicable law:
— Law of the Russian Federation dated 02/07/1992 N 2300-1 “On the protection of consumer rights.”
3. Judicial practice:
— Resolution of the Federal Antimonopoly Service of the Central District dated October 17, 2005 N A35-7373/03-C22;
— Resolution of the Federal Antimonopoly Service of the East Siberian District dated August 27, 2007 N A33-7049/2006-F02-5473/2007;
— Resolution of the Seventeenth Arbitration Court of Appeal dated 06/08/2011 N 17AP-4348/11;
— Resolution of the Seventh Arbitration Court of Appeal dated July 1, 2009 N 07AP-4403/09;
— Resolution of the Eighteenth Arbitration Court of Appeal dated April 13, 2009 N 18AP-1603/2009;
— Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation dated November 8, 2005 N 8233/05;
— Resolution of the Federal Antimonopoly Service of the Moscow District dated February 12, 2010 N KG-A41/14-10 in case No. A41-11645/09;
— Resolution of the Federal Antimonopoly Service of the Moscow District dated July 6, 2009 N KG-A40/5621-09;
— Resolution of the Fifteenth Arbitration Court of Appeal dated November 29, 2013 N 15AP-18193/2013;
— Resolution of the First Arbitration Court of Appeal dated December 12, 2012 N 01AP-6306/12;
— Resolution of the Third Arbitration Court of Appeal dated January 12, 2012 N 03AP-5564/11.
Comment source:
“COMMENTARY ON THE CIVIL CODE OF THE RUSSIAN FEDERATION. PART TWO OF JANUARY 26, 1996 No. 14-FZ"
ON THE. Barinov, S.A. Baryshev, E.A. Bevzyuk, M.A. Belyaev, T.A. Biryukova, Yu.N. Vakhrusheva, R.R. Dolotina, N.V. Elizarova, R.Yu. Zakirov, N.A. Zakharova, P.Z. Ivanishin, S.Yu. Morozov, T.N. Mikhaleva, 2014
Conclusion. What is the difference between an advance and a deposit?
The deposit and the advance are similar. If you look for differences between these two concepts, then I would say this. An advance payment is a partial payment for goods; an advance payment is intended to partially fulfill a monetary obligation; after paying the advance payment, the obligation of the other party to fulfill the obligation may arise (or it may not arise). The deposit, by its nature, performs the function of both an advance and security of an obligation. But the main function of the deposit is precisely the security function.
In addition, if the cash payment is a deposit, then this must be clearly stated in the written agreement of the parties, otherwise it will be considered simply an advance payment.
What happens in practice?
The reality is that not always the buyer, in case of refusal to conclude a transaction for the purchase and sale of an apartment, can simply come and get his money back; he is often faced with the seller’s refusal to return the advance payment, since he considers the amount paid as an advance payment as compensation due to the failure of the transaction .
Unfortunately, the buyer does not have many ways of pre-trial influence on the seller, so if the seller does not return the advance “peacefully” after the buyer has made this demand to him, this issue will not be resolved quickly. The first thing the buyer must do is send a written statement to the seller demanding the return of the advance and indicating the period within which the seller must do this. The demand must be sent in such a way that the buyer has evidence of its direction: a receipt from the seller confirming receipt of the demand in person, sent by registered mail or telegram with acknowledgment of receipt.
If the advance was made to an agency acting under a power of attorney on behalf of the seller, the return of the advance amount for the buyer may also become problematic. On the one hand, real estate agencies, not being a party to the transaction, do not have the right to withhold an advance or deposit. On the other hand, often a sum of money is transferred to the agency in the form of a contract of agency, in which there is usually not a word that the agency undertakes to return the advance amount upon the buyer’s first request. If the deal does not go through, the agency considers this amount to be its compensation for lost profits. The maximum that can be specified in such contracts as a condition for the return of the advance is the real estate agency’s refusal to carry out the transaction.
Sometimes an advance payment can be transferred with the signing of an advance agreement, which is part of the agreement for the provision of agency services. However, upon careful study of such a document, it turns out that the deposited amount acts as an advance to the agency for the provision of consulting services for the purchase of an apartment. The buyer is convinced that the advance payment will be a guarantee that the apartment will be sold to him, but in fact such a document is only a guarantee that the agency will receive its commission (or part of it). At the same time, the buyer has an obligation to purchase an apartment through this agency, and the latter only undertakes to remove the property from advertising.
In such agreements, there may formally be a lot of reasons not to return the advance amount paid to the buyer - for example, refusal to follow recommendations for purchasing an object, negotiating with the seller bypassing the agency, or refusing the deal.
To avoid getting into such situations, the most important thing is to carefully study the documents, giving serious importance to legal formulations and terms. We recommend that before making an advance, you consult an independent lawyer who will explain all the possible consequences of the contract being concluded.
