Payment of money or other valuable
consideration as a pledge for fulfillment of
a contract. If failure of performance
occurs, the deposit is usually forfeited. If
performance is undertaken, the deposit
usually acts as a part payment toward the
purchase price.
The deposit in real estate transactions,
which may be paid by cheque, certified
cheque, or cash, forms two functions. First,
it is a sign of good faith and sincerity by
the person making the deposit; secondly, it
represents part of the purchase price. Five
to ten percent of the offered price appears
sufficient to illustrate good faith in the
transaction.
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