1. What's the difference between contract deposit and liquidated damages?
1, different definitions
Security deposit refers to the money deposited by one or both parties in the other party or a third party to ensure the performance of the contract. This concept is widely used, such as contract bond, performance bond in bidding, bond in futures trading, and even bond in bail pending trial.
Liquidated damages refer to the money paid in advance by the parties through negotiation after the breach of contract, which has nothing to do with performance. Although the agreement of liquidated damages is freely agreed by the parties, this freedom is not absolute but limited.
2. Different expressions
(1) There are two common forms of deposit in real economic life: one is the deposit required by the parties to the contract to ensure the realization of their creditor's rights. Another form of deposit is the deposit paid by both parties to a third party (usually a notary office) recognized by * * * to ensure the performance of their respective obligations when the contract is established.
(2) liquidated damages are the amount of breach of contract that one party needs to pay to the other party.
3. Different functions
(1) The deposit also has the same function as the deposit to guarantee the realization of the contract, but it does not have the function of double return. Moreover, the parties can agree on the functions of the deposit themselves (such as the guarantee for the conclusion of the contract, the conditions for the contract to take effect, the proof of the establishment of the contract, or the expenses for the termination of the contract). These functions do not apply to margin.
(2) The main function of liquidated damages is to ensure that both parties can better perform the contract and protect the legitimate rights and interests of the parties. If one party fails to perform as agreed in the contract, paying liquidated damages to the observant party will prompt the observant party to perform the contract.
Second, the difference between deposit and liquidated damages
Both deposit and liquidated damages are the money that one party should pay to the other party, and both have the function of ensuring the performance of the contract. But the deposit and liquidated damages are different. The main differences are as follows:
1, the fundamental purpose is different: the fundamental purpose of deposit is to ensure the realization of creditor's rights, so deposit is a form of guarantee. The fundamental purpose of liquidated damages is to punish the breach of contract, is a way to bear civil liability, and is a kind of compensation for losses that binds both parties to perform the contract.
2. Different delivery time: the deposit is paid in advance when the contract is signed or before it is signed. As a guarantee for the signing or performance of the contract, it has a penalty of double return; The liquidated damages were agreed by both parties in the contract, and the compensation payable by the breaching party was not paid in advance.
3. The reasons are different: the deposit is agreed by both parties in the deposit contract, and the liquidated damages are generally agreed by both parties themselves. The deposit will not take effect until it is delivered, that is to say, even if the two parties have agreed on the deposit in the contract, the deposit has not been actually delivered and the deposit clause will not take effect; The punishment is effective, as long as both parties sign and agree, it has legal effect.
4. Different recognition criteria: the amount of deposit cannot exceed the amount stipulated by law. According to the provisions of the Guarantee Law, the deposit shall not exceed 20% of the subject matter of the contract at most, and the excess shall be invalid. Because of the nature of scheduled compensation, liquidated damages are determined according to the amount of losses that may be caused by breach of contract.
5. The conditions for entry into force are different: the deposit takes effect after payment, and if the goods are not sold as a contract guarantee, the deposit shall be repaid in two times; The liquidated damages are effective as promised. As long as the contract is established and the breach clauses are dealt with, the liquidated damages will take effect. Once the contract is signed, the legal act will take effect. If one party fails to perform the contract, it will pay the other party a penalty of twice the amount signed in the contract.
6. Different functions:
(1) The functions of the deposit: 1. To prove the establishment of the contract; The second is to ensure the performance of the contract; Third, it has the functions of punishment and advance payment. After the performance of the contract, the deposit shall be recovered or used as the price.
(2) The role of liquidated damages: First, punishment and protection. As long as there is the fact that the contract is not performed or not performed correctly due to the fault of the parties, whether it causes losses to the other party or not, liquidated damages must be paid. The second is to compensate the losses caused by the infringement. If the injured party can prove that the losses caused by breach of contract are greater than the amount of liquidated damages, it has the right to ask the breaching party to compensate the insufficient part. After the defaulting party pays the liquidated damages, the defaulting party has the obligation to continue to perform the contract as long as the other party thinks it necessary to continue to perform the contract and insists that the defaulting party continue to perform the contract.
When a citizen or unit signs a contract with others, one party may require the other party to pay a certain amount of deposit. If the party who pays the deposit later, the party who breaches the contract, it is very likely that it will not only fail to get back the deposit already paid, but also bear certain liability for breach of contract.