Summary
It depends on which party failed to perform and on the true nature of the payment. Where the recipient fails to perform, the payer may recover the deposit and may also claim damages. Where the payer defaults, the position depends on the character of the payment. A true deposit is ordinarily forfeited. A part payment of the price, made in advance for something not yet received, is generally recoverable, subject to the recipient's claim for its loss. Where a "deposit" is disproportionate to what is customary, a court may treat it as a penalty and order it repaid. In sales of land, a deposit of ten per cent of the price is the accepted figure.
Last reviewed 22 September 2026
The legal position
Deposit or part payment. The description used by the parties is relevant but not conclusive; the substance of the payment is decisive. A deposit is paid as earnest, that is, as a guarantee of the payer's performance. If the payer fails to complete, the deposit may be forfeited. If the contract is completed, the deposit is applied towards the price. A part payment is an instalment of the price. Where the contract is brought to an end before the payer has received anything in return for it, a part payment is generally recoverable, whichever party was at fault. The recipient retains its right to claim damages for any loss caused by the payer's default. Payments for goods or services already received, and instalments that had already fallen due, stand on a different footing. Whether a payment is a deposit or a part payment depends on the terms of the contract and the intention of the parties, and a single payment may be described as both.
Reasonableness of the amount. A deposit is forfeitable only if it is reasonable in amount. In contracts for the sale of land, a deposit of ten per cent of the price is customary. A deposit of that amount may be forfeited even though it bears no relation to the vendor's actual loss. A substantially larger sum is not a true deposit. Its forfeiture may be treated as a penalty, and the court may order that it be repaid in full.
Default by the recipient. Where the recipient fails to perform, and the payer has received nothing of what was bargained for, the payer may recover the money paid. The payer may also claim damages for any further loss.
Frustration. Where the contract is frustrated, money paid is recoverable only upon a total failure of consideration, that is, only where the payer received no part of what was bargained for. Trinidad and Tobago has no legislation modifying that rule.
Practical implications
Sales of goods. A buyer who withdraws without justification after paying a reasonable deposit is likely to forfeit it. A buyer whose seller fails to deliver is entitled to its return.
Sales of land. A deposit of ten per cent of the purchase price is customarily paid on the signing of the agreement for sale, with the balance payable on completion. A purchaser who defaults may expect to forfeit the deposit. Where the vendor defaults, the purchaser is entitled to its return and may claim damages. The purchaser may also seek an order compelling the vendor to complete the sale. See Can a seller who withdraws from a sale be compelled to complete it?
Contracts for services and events. Where a booking is cancelled, the treatment of the deposit depends on which party cancelled and why, and on the cancellation terms of the contract.
"Non-refundable" deposits. Such a description strengthens the recipient's position where the deposit is reasonable in amount. It does not preserve a sum so large that its forfeiture would operate as a penalty.
A security deposit under a tenancy is of a different character. It is held against arrears of rent and damage to the premises, and is dealt with at the end of the tenancy in accordance with the tenancy agreement.
Recommended steps
The receipt and the contract should be examined to establish whether the payment is described as a deposit or as a part payment, whether it is stated to be non-refundable, and what is to happen upon cancellation.
In a sale of land, the deposit should be paid to the vendor's attorney-at-law to be held as stakeholder, rather than paid directly to the vendor. That is the customary arrangement, and it protects the purchaser in the event of the vendor's default.
Where the recipient has failed to perform, a written demand should be made for the return of the money and compensation for any loss, specifying a date for compliance.
A party contemplating withdrawal should seek a negotiated outcome before refusing to perform. Where the sum to be retained is disproportionate to what is customary, that should be raised, since the rule against penalties may afford relief.
A business that takes deposits should set them at a proportionate level, and should state in writing their purpose and the circumstances in which they are refundable.
Important notice. This commentary is a general statement of the law of the Republic of Trinidad and Tobago and is provided for information purposes only. It does not constitute legal advice, and it is not to be relied upon as legal advice or as a complete or current statement of the law. The law may have changed since the date of last review. Readers should verify all information for themselves, including the current text of any legislation referred to, and should obtain legal advice on their particular circumstances before acting, or refraining from acting, on anything in this commentary. Reading this commentary does not create an attorney-client relationship, and no responsibility is accepted for any loss arising from reliance on it. Any decision of a court referred to in this commentary is cited for the principle it states; similar results cannot be guaranteed, and a decision may be subject to appeal or change.
Commentary / Contract Law
When is a deposit refundable?
By Suraj Sakal, Attorney-at-Law, called to the Bar of the Republic of Trinidad and Tobago