This is a type of mixed confirmatory deposit which is provided as security for the performance of the contract, through forfeiture or repayment in double. In other words, if the party who paid the deposit fails to comply, they will lose it, although this does not necessarily release them from the possibility that the other party may still claim specific performance of what was agreed and compensation for any loss and damage suffered.
As with confirmatory deposits, in the event of breach by either party, the buyer will lose the amount paid and the seller must repay double the sums received. However, unlike withdrawal deposits, they do not entitle the parties to terminate the contract unilaterally.
The defaulting party may only be released from performance if this has previously been expressly agreed. Otherwise, they may be required to perform the contract compulsorily or face termination together with payment of loss, damage and interest, in a similar way to confirmatory deposits.
In other words, in these cases the deposit is treated as the amount of the penalty payable in the event of breach, without prejudice to the possibility of applying to the courts for specific performance or termination and, in either case, with the additional possibility of claiming compensation for any loss and damage caused by the other party’s breach.