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You may be asked to pay a deposit when ordering something from a shop, getting some building work done, booking a hotel room or when hiring some DIY tool or other piece of equipment.

What the law says

When you agree to pay a deposit, it then becomes part of a legal contract. Such contracts give rights to, and place duties on, both you and the supplier.

Useful information

Shops will sometimes ask for a deposit if they are ordering something specially for you or are reserving an item for you. If you then change your mind, the shop can legally keep your deposit. Particularly in the case of the reserved item, they may also argue that they could have sold the item if it had not been reserved for you. If they do, they may insist that you keep your promise and buy it or else compensate them for their loss of profit.

Builders sometimes ask for a deposit, saying they need the money to pay for the materials to start the agreed job. If this happens to you, after you have agreed the contract, ask to see the invoice from your builder's supplier. Only pay the amount invoiced and insist on a receipt. Most suppliers allow 'start up' credit to reputable builders and if the builder asks for a deposit for materials before you have agreed to give him the job, be suspicious. If he hasn't got credit, he may have a bad reputation. And of course, you should never ever pay a deposit to someone you know nothing about. If you do, that could be the last you will see of your deposit and your 'builder'.

If you've paid a deposit when booking a hotel room and then cancel or don't turn up, the hotel will almost certainly keep your deposit. If you tell the hotel that you are cancelling, it must try to re-let your room. But if it can't, it may claim loss of profit from you.

If you are hiring a piece of equipment, you may be asked for a deposit on top of the cost of hiring. You will get the deposit back if you return the equipment undamaged. The hirer cannot keep your deposit because of any damage caused by normal wear and tear.

Similarly, and again unless otherwise agreed, if having accepted a deposit from you the trader fails to keep the goods and you are unable to complete the purchase, the deposit should be returned to you (in this situation you may also be able to claim compensation from the trader if, as a result of his failure to supply you with the goods you had agreed to buy, you have to spend more to obtain the goods elsewhere).

What to do if you have a complaint

Try to sort it out first with the deposit holder. If your dispute is with a builder who is a member of a trade association, ask them to help. Some associations may pay back deposits paid to member builders who have gone out of business.

The addresses and phone numbers of some associations are shown below.

If you can't get your problem sorted out yourself, contact Consumerline on 0300 123 6262 or ask your local Advice Centre or Citizens Advice to help you.

Glass and Glazing Federation
54 Ayres Street
Phone: 020 7939 9101
Fax: 020 7357 7458
Northern Ireland Manager
Federation of Master Builders
39 Malone Road
Phone: 028 9068 4260
Fax: 028 9066 9724
Construction Employers Federation
143 Malone Road
Phone: 028 9087 7143
Fax: 028 9087 7155

From category: Buying Goods & Services