Deposits, non-refundable deposits, and the law

Non-refundable deposits are one of the fastest ways to annoy customers
and attract regulator attention. Traders love them; consumers and the
CMA are less keen. The question isn't whether you can ever keep a deposit --
you can -- it's whether your terms for keeping it stack up as fair under
UK law.

Deposits in consumer contracts

In consumer contracts, unfair cancellation charges and deposits can be
challenged under CRA
2015 The test is broadly whether your term creates a significant imbalance to
the detriment of the consumer and whether it's reasonably necessary to
protect your legitimate interests. Keeping the entire fee when someone
cancels months in advance with minimal impact on you is unlikely to look
reasonable.

Business contracts are more flexible -- but not lawless

When you sell only to other businesses, CRA doesn't apply; you're under
general contract law and, in some cases, UCTA
1977 Courts still dislike penalty clauses dressed up as deposits. If your
cancellation terms look like punishment rather than a fair reflection of
your loss, you're on shaky ground.

Non-refundable vs part-refundable

You don't have to pick a single approach for every contract. Many UK
businesses use a sliding scale:

• Fully refundable within a clear window.

• Part-refundable once you've incurred non-recoverable costs.

• Non-refundable only very close to the date or after work has started.

The key is explaining those stages in advance and linking them to
real-world costs -- not arbitrary irritation
levels.

Telling customers the truth

If your deposit is non-refundable in practice, say so in plain English
and explain why. Hiding behind vague phrases like "admin fees may apply"
invites trouble. CMA
guidance takes a dim view of nasty surprises in the small print.

How the generator handles deposits

The Trading Terms generator asks you how you treat deposits and then turns
on wording that matches your actual process, not your idealised one. If
you genuinely offer refunds in a certain period, the document reflects
that. If you never refund, it sets expectations clearly and tracks the
line between "firm" and "unfair" as far as UK law allows. You still need
to behave in line with the words you've
chosen.

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