A confirmatory deposit agreement is intended to confirm the parties’ commitment to the sale and purchase, in other words, to comply with what has been agreed in that contract. This type of deposit agreement guarantees that the purchase and sale of the property will be completed and involves an advance payment on the purchase price, with that amount being deducted from the final price.
In this type of agreement, the amount itself is not the key point; rather, what matters is that the sum paid under the deposit agreement should be sufficient to secure the transaction in question.
If one of the parties later wishes to withdraw, the affected party may demand completion of the sale or compensation for losses and damages.
What is the difference compared with earnest money agreements?
What distinguishes an earnest money agreement from a confirmatory one is that earnest deposits allow the parties to withdraw from the contract, whereas if we sign a confirmatory deposit agreement, the other party may require us to fulfil it.
And how does it differ from a deposit agreement with penalty clause?
In this case, the key difference between a confirmatory deposit agreement and a deposit agreement with penalty clause is that, in the event of breach, compensation for loss and damage in the case of confirmatory deposits must be determined by a judge, as mentioned above. In the case of a deposit agreement with penalty clause, however, this is generally set out in the amount of the deposit itself, since this type of deposit represents the sum that the buyer or seller must pay if they withdraw from the sale and purchase agreement before completion.