Q&As

A paid a deposit to B for an item B was selling in the course of business, with A proposing to pay the asking price. If B were to rescind the deal, citing contractual terms that A has not seen, is B in breach of contract with A?

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Published on LexisPSL on 27/08/2020

The following Commercial Q&A provides comprehensive and up to date legal information covering:

  • A paid a deposit to B for an item B was selling in the course of business, with A proposing to pay the asking price. If B were to rescind the deal, citing contractual terms that A has not seen, is B in breach of contract with A?

A contract is formed where there is an offer, acceptance, consideration and an intention to create legal relations. In this scenario, it appears that all the elements of a valid contract are present. There seems to have been a verbal offer and acceptance, with the payment of a deposit acting as consideration for the item B is selling and also signalling a desire to create legal relations.

The fact this is a business to business interaction also suggests that there is an intention to create legal relations. However, it will be important to establish whether the deposit was paid and order made 'subject to contract' in which case the arrangement may not be binding, see Practice Note: Heads of terms, in particular the section titled 'Legally binding v non-legally binding’. The communications between the parties prior to and at the time of A placing the order and paying the deposit to B may assist in establishing the status of the arrangement.

For more on the requirements for a valid contract,

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