2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
Even professional lawyers sometimes have questions about advance payments and deposits. What is their difference from each other? What to choose - a deposit or an advance in a particular situation? These questions are worth seriously thinking about sometimes.
Advance payment. Word meaning in dictionaries
Ozhegova:
Advance payment is a material value or money that is issued on account of wages or payments due to someone.
Efremova:
Advance payment is financial or material values that are issued against future payments.
Encyclopedic Dictionary:
Advance payment is a sum of money or some property value. Issued against due salary, forthcoming payments, transfer of property, forthcoming expenses.
What is a deposit?
Article 380 of the Civil Code of the Russian Federation contains the following definition. Deposit - the amount of money that is issued by one party to the other party under the contract. The procedure is carried out to prove the conclusion of contractual obligations, and also ensures their fulfillment.
The amount is used as a sanction in case of non-performancecontracts. The Civil Code of the Russian Federation establishes sanctions in Article 381:
- If the party who gave the deposit does not fulfill the terms of the contract, then its amount is non-refundable.
- If the contract is not executed due to the fault of the party that received the deposit, then its amount must be returned twice. The Civil Code does not provide a complete definition of advance payment. But in the legislation there is a definition of relations on advance payments. An advance payment is a partial or full payment for services or goods, which is carried out in advance.
What is the difference between an advance payment and a deposit?
Unlike a deposit, an advance does not impose obligations on the parties to fulfill the agreement. Each party has the right to withdraw from the contract, in which case the advance payment will be refunded in full. This is their main difference. Also, the contract under which the advance payment is made can be concluded orally, and the deposit must be made in writing.
Thus, the deposit is a completely independent agreement. And includes 3 functions:
- payment;
- Security:
- authenticating.
And an advance is an action that carries an exclusively payment function.
What to choose?
In Russia and in the CIS in general, the deposit agreement is rarely used. It often accompanies only real estate transactions, as well as large financial transactions.
In cases where losses may arise from non-performancepreliminary obligations, it is more reasonable to conclude an agreement on a deposit.
Today, a simplified form of transactions is common. It represents the receipt of an advance, the agreement on which indicates a separate clause that has a list of pen alties.
Given all of the above, we can recommend the use of an advance payment agreement. But you should first obtain guarantees by prescribing sanctions in the contract for refusing to execute or conclude the main document. And, at your discretion, set the types of fines and their sizes (a certain amount of cash or a convenient percentage).
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