Know Your Rights: Non-refundable deposit may be enforceable

Richard Alderman

Q. If I cancel a retail purchase, in this case furniture, within the 72-hour cancellation period, does the store have the right to keep my deposit? The contract does state that the customer shall forfeit the deposit to the store.

A. First, unless a store expressly gave you three days to cancel, you generally do not have any time to change your mind and get out of the contract. As a general rule, once you sign the contract you are bound. There is a time period to cancel in only very limited cases. For example, you have three days to rescind a contract with a health spa, or in a door-to-door sale, or with a contract that puts a lien on your home. 

On the other hand, any contract may give you the right to change your mind and cancel, even if law does not require it. Based on what you say, it sounds like the furniture store expressly gave you three days to cancel the contract, which you did. Whether you get back the deposit, however, depends on the terms of the contract and the amount of the deposit. 

As a legal matter, there is nothing unlawful about requiring a nonrefundable deposit. If the contract states the store keeps the deposit if you cancel, my opinion is that the store may retain the deposit, unless the deposit was unreasonable. Under the law, a contract may provide for the forfeiture of a deposit, as compensation for the loss the seller may have suffered by your cancellation. But to be enforceable, the non-refundable deposit must be “reasonable.” For example, as far as I am concerned, the store could keep a 10 percent deposit to compensate it for the time spent on your transaction and the possibility of losing a sale. But a much larger deposit, say 50 percent, would probably be considered a penalty rather than compensation and not enforceable.

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