Jones ordered a new car and was required to pay a $500 deposit. Which of the following is correct with respect to that deposit?
A) If the court feels that the damages exceed the deposit, they will order the breaching party to pay any difference.
B) A down-payment is an amount of money to be forfeited if either party is in breach of contract.
C) The deposit must be a fair reflection of the loss actually suffered.
D) The deposit must be an honest attempt by the parties to pre-estimate damages in the event of a breach.
E) If no deposit had been paid, there could be no contract.

Question

Quizplus · Accepted Answer

A deposit is an amount of money paid by one party to another as security in event of a breach of contract. The purpose of the deposit is to pre-estimate damages and ensure that the non-breaching party has some security in the event of a breach. The deposit must be an honest attempt by the parties to pre-estimate damages in the event of a breach.

Jones Ordered a New Car and Was Required to Pay