QLD Commercial Law - Am I Entitled to a Refund of the Deposit?

[Mike Walton]

I have been negotiating with a private seller on purchasing his business customer base. it's a selective key customer list, in the field of garden maintenance and landscaping.

I have not yet signed any contract but have paid him 2 deposits. one for $1000, which he deems is not refundable. Since then I have paid another $5000 to show my commitment to this deal. I have to ask him to put it in an email that this is refundable if the purchase does not go through. We are coming to a closure of this agreement to settle another $16000 after signing the contract on Sunday, and I will take ownership on Monday.

However, recently I have been made aware that there are some changes to the key customer list which does not reflect my original deal on pricing, therefore I am having doubts regarding the quality of the key customer commitments.

Am I entitled to claim back the original deposit of $1000, and the $5000 under Commercial Law if I do not go ahead and sign the contract?

 

[James D. Ford - Solicitor]

Hi Mike

Firstly, you should not be paying any deposits until you have a signed Contract that sets out all of the agreed terms, including whether the deposits will be refundable or not, and any exceptions that apply, for example, if key statements made by the Seller turn out to the false.

Who is holding the deposit money?

My understanding is that the verbal contract was that the $1,000 deposit was non-refundable... therefore, it would be very difficult to retrieve this money. unless you can show misleading and deceptive conduct on the behalf of the seller... which you relied upon in deciding to pay the initial deposit...

The situation regarding the $5,000 deposit is uncertain... as no agreement has been reached regarding whether it would be refundable or not... the same misleading and deceptive conduct logic applies as above...

Generally, after payment of deposits, which are typically held by a third party, such as a business broker or a lawyer... you are provided with the opportunity to conduct due diligence on the quality of the key customer list.

If the list does not hold up to scrutiny... then the Contract should have a purchase price adjustment clause - based on a pre-agreed formula, and/or to right for you to terminate the Contract, and obtain some or all of your deposit money back.

If you decide to proceed to settlement - you confirm your completion of due diligence, and the results... and any disputes can be taken to a third party to decide.

Settlement can then proceed.. and once any disputes are resolved... and adjustments can be made.

Who has prepared this Contract?

I strongly recommend the review by a lawyer before you sign any Contract.


Kind regards