What is a criminal deposit contract and differences with other types

When formalizing the sale of a home or any other type of property, the so-called deposit contract is frequently signed. This is a way to protect yourself and the other party in case one of you decides to back out, as well as when the operation is cut short for some reason, causing prejudice in the other party.

There are different types of deposit: in this article we explain what are criminal depositshow they differ from confirmatory deposits and penitential deposits, as well as how they can affect you.

The criminal deposit contract

Las criminal charges They consist of a type of penalty that is provided for in some real estate sales transactions, as an annex or complement to the sales contract. This type of deposit contract is indirectly regulated in article 1152 of the Civil Codewhich states the following:

“In obligations with a penal clause, the penalty will replace compensation for damages and the payment of interest in the event of non-compliance, if nothing else has been agreed upon. The penalty may only be made effective when it is enforceable in accordance with the provisions of this Code.”

According to regulation of criminal deposits, these are, in reality, a penal clause that implies that, in the event that the operation is not closed according to the agreed terms, the other party must be compensated in the manner and amount agreed upon in them. Therefore, this type of deposit is only activated in the event of non-compliance.

Characteristics of the criminal deposit contract

These are some of the characteristics of criminal deposits What you should know so as not to confuse them with other types of deposit:

• They do not serve as a price advancecontrary to what happens with confirmatory deposits.
• They function as compensation for damages.
• Its activation does not imply that the obligation to comply with the agreement disappears.. In other words, if, for example, you do not formalize the sale and pay the price within the agreed period, you will not only continue to have the obligation to formalize the sale, but you will also have to pay the penalty deposit. However, it can also be agreed that the payment of the penal deposits eliminates the main obligation.
• The creditor may not jointly demand (unless that power has been granted) the fulfillment of contractual obligations and the payment of criminal deposits.
• It is possible to moderate the sentence equitably through a judicial process in the event that the non-compliance has not been complete or has been irregular.

What is the amount of the criminal deposits?

There is no fixed or determined amount for criminal deposits: in general, it will be the sum agreed upon by the parties.

It is common for the buyer to lose the amount delivered or to have to pay the seller the agreed amount in case of non-compliance. On the seller’s side, if he defaults, he must pay compensation “for a certain amount” or in duplicate with respect to the amount delivered as criminal deposit by the buyer.

Criminal deposit model

If you are looking for a example of criminal depositstake note of this sample criminal deposit contract that of penal deposit clause:

“If the selling party fails to comply with any of the obligations stipulated in this contract, it will be obliged to return double the amount received as compensation for damages.

In the event of non-compliance by the buyer, the amounts paid to date will be lost.

Likewise, the complying party may terminate the contract through reliable communication or demand its compliance.

“Both parties recognize and accept the effects of the penal clause and their free intention to include it in this contract.”

Difference between penal and penitential deposits

Criminal or penitential deposits They may seem the same, but they are different concepts. The main difference between the two is that the penitential deposits allow you to withdraw from what was agreed in exchange for paying them. Therefore, the penitential deposits authorize you to withdraw from the contract, functioning as a kind of agreed ‘price’ associated with said resignation.

As we have seen, in the case of criminal deposits the obligation to comply with the agreement will disappear only when it is expressly agreed upon, regardless of the fact that we are always obliged to pay it in the event of non-compliance.

The nature of criminal deposits and penitential deposits is also different: while penal deposits function as compensation for damages, penitential deposits function as a guarantee to ensure the commitment of one or both parties to enforce what was agreed upon.

Penal and confirmatory deposits, how are they different?

Regarding the main difference between criminal deposits and confirmatory depositsis that the latter serve as an advance payment of the total price of the home purchase, while the criminal deposits, as we have seen, consist of an agreed sum as compensation for damages in the event of non-compliance.

In the case of confirmatory deposits, failure to comply with the contract gives rise to two options: either to demand compliance with the obligation, or to resolve it and request compensation. This compensation does not replace a possible compensation for damages, such as that applied when there are criminal deposits.

Penal deposits in case of mortgage denial

It is very common that the closing of a purchase and sale operation depends, on the buyer’s side, on the granting of the necessary mortgage financing. After all, there are few who can afford the payment of a property without resorting to a loan in the form of a mortgage.

It is important to be careful in these cases, since Justice could turn against you if your financing request turns out to be unrealistic. For example, if you ask for more than 80% of the price of the property or if you do not have sufficient resources to meet the fee that will result from your request with some ease.

Although criminal deposits can only be demanded when the non-compliance is our fault (and not, for example, in the event of force majeure), being denied a loan when our aspirations are unrealistic would not exempt us from guilt.

In short, it is important to be clear about how the deposits are structured and what type they are to ensure that we do not lose our money if we do not obtain the desired financing.