Deposit forfeiture is the loss of a deposit by a party who fails to proceed with a transaction in breach of the agreement. It is one of the main consequences a sale contract attaches to a buyer (or sometimes seller) defaulting.
Where you’ll see it
You’ll see deposit forfeiture where a buyer pulls out without a valid contractual reason, allowing the seller to retain the deposit. Contracts may also provide for a defaulting seller to compensate the buyer, sometimes by returning the deposit plus an equivalent amount.
Why it matters
The deposit is usually the largest sum at stake before completion. Knowing exactly when it can be forfeited — and the carve-outs where it is refundable, such as failed conditions precedent — is essential before paying it.
What it is not
Deposit forfeiture is not automatic on any change of mind — it depends on the contract terms and whether a genuine breach occurred. It is also not the only remedy; parties may have other rights depending on the agreement.
Example
A buyer withdraws after signing, with no contractual ground; under the agreement the seller retains the deposit as the agreed consequence of the buyer’s default.
Connected documents and parties
Sale agreement, deposit receipt, notices; buyer, seller, agent.
Going deeper: related reading: breach of contract and 10% deposit.
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