How To Charge A Deposit Correctly For Services

The term, 'non-refundable deposit' is oftentimes used past business owners, but just because a deposit is referred to equally 'not-refundable' does not mean that it really is. Conversely, equally a business organization owner, a deposit tin can be non-refundable if sure criteria are met.

Meeting the Non-Refundable Criteria

Concern owners demand to exist careful in how they charge a non-refundable deposit to ensure that it meets the relevant criteria. Non-refundable deposits are intended to protect a business in circumstances of sudden cancellation and to compensate the business concern for the time, endeavour and money expended up to that point. Therefore, it is crucial for a business concern to ensure that the not-refundable deposit that they charge in these circumstances is reasonable and proportionate with reference to protecting their legitimate business interests and is non excessive or used as a 'penalisation' against a customer or client. What volition be considered reasonable and proportionate will depend on the specific circumstances and will be different on a instance-by-case basis.

Documenting the Deposit Correctly

Not merely does a business demand to ensure that a non-refundable eolith is reasonable and proportionate in the circumstances, only they must also ensure they disembalm all relevant information regarding the non-refundable deposit to their customers or clients. It is crucial for a business to disembalm the terms of the non-refundable deposit in the correct way otherwise they may be seen to be engaging in misleading or deceptive conduct, which is against the law.

At a minimum, the business must disclose the terms of a non-refundable eolith in a Terms and Conditions document (or similar) which is provided to the customer or client at the fourth dimension of, or prior to, engaging them.

Fifty-fifty ameliorate, the business should also seek to obtain an acknowledgement from the client or customer that the non-refundable deposit is reasonable and proportionate in protecting the business' legitimate business interests. Again, this tin be incorporated into the Terms and Atmospheric condition document being used by the business. You can also reiterate this to the client or customer when yous request the payment of the eolith from them. Transparency is cardinal!

But how does it work in real life?

By way of an example – let'due south say yous are a photographer who charges $300 for a photo shoot, with a non-refundable deposit of $100 payable prior to confirming the booking. Your Terms and Conditions (which your client signed and returned prior to engaging yous) stats that the deposit is non-refundable and outlines that information technology is calculated with reference to the actual costs that your business incurs. Your customer cancels the booking two days before the shoot. They allege that your business cannot retain the not-refundable deposit. In these circumstances, whether you lot can retain the eolith would depend on (as a minimum):

Whether your Terms and Conditions properly explain that the deposit is non-refundable;
Whether you have properly engaged your client/customer (by providing them the Terms and Conditions and making sure they have read and acknowledged them);
Whether the amount of the not-refundable deposit is reasonable, with reference to the actual costs that your business has incurred (including things similar time involved in making the booking, the loss of turn a profit if you are unable to re-book the session, whatsoever others costs that you have incurred etc.); and
Whether the not-refundable deposit is proportionate to the overall price of the product or service that y'all are providing.

Without knowing any further data, on the above facts alone, it would announced that the deposit would be not-refundable, as the document requirements appear to have been met and $100 may likely be considered to be a reasonable and proportionate amount.

Enterprise Legal - Non Refundable Deposits: The Do's & Don'ts

The Consequences

What happens if a business organisation fails to disembalm the terms of the not-refundable deposit or doesn't take the time to ensure they are charging a reasonable and proportionate amount? The customer or client may be entitled to go that deposit back and the business organisation will not be entitled to be compensated for the loss they have suffered for the time, effort and costs incurred up until that point in fourth dimension.

What Every Business Should Do

If you are a business owner who wants to charge non-refundable deposits, so you should obtain advice from a specialist business organization lawyer regarding the drafting of your Terms and Weather and an cess of the reasonableness of the corporeality that y'all want to charge. Unfortunately, this is another circumstance where y'all cannot utilise terms that y'all have sourced from Google, as they are not customised to your business organisation, which will affect the likelihood of the enforceability of the provisions.

Are you looking to accuse not-refundable deposits for your business's services?

Don't rely on dodgy downloaded templates - Speak to a specialist business lawyer from Enterprise Legal today!

Nosotros've helped hundreds of businesses of all sizes from all across Australia to draft watertight Terms and Conditions for their unique circumstances.

Get information technology done correct from the start, at fixed-fee rates with NO hidden surprises – contact EL today for an obligation-free consult:

☎️ |(07) 4646 2621
✉️ | Submit an Online Asking