Contract Deposit

A contract deposit is a portion of the payment that the buyer pays to the seller in advance after signing the contract and before shipment, usually 10%-30% of the total contract amount. Its core function is to guarantee contract performance: for the buyer, if it breaches the contract after paying the deposit, the deposit is non-refundable; for the seller, if it breaches the contract, it must refund double the deposit. It is commonly used in customized products, large orders, or cooperation with new customers to reduce the seller's stocking risk. Notes: 1. The deposit ratio should be negotiated by both parties; if too high, it may affect the buyer's cash flow. 2. The contract should clearly specify the nature of the deposit, payment time, refund conditions, and consequences of breach. 3. Unlike an advance payment, a deposit has a guarantee nature; an advance payment must be returned upon breach, while a deposit is subject to the deposit penalty rule. 4. Difference from a down payment: a down payment is usually regarded as an advance payment and has no punitive nature. In foreign trade, it is recommended to use T/T or L/C for deposit payment and mark 'Deposit' to avoid confusion with 'Advance Payment'.