Un earnest money contract, also known as signal contract, is a very common pre-contractual agreement in Spanish legislation, especially in operations of sale of real estate. Through this contract, the buyer gives the seller an amount of money as a sign of his commitment to complete the transaction within an agreed period.

Where earnest money contracts come into play

Earnest money contracts are not limited exclusively to the purchase and sale of real estate; Its use extends to various operations where it seeks to ensure a purchase or sale commitment, offering guarantees to both the buyer and the seller. In the field of vehicles, both new and second-hand, it is common to use earnest money contracts to reserve the car while financing is arranged or a more detailed inspection of the vehicle is carried out.

In the sector of second-hand goods, such as furniture, works of art, or collectibles, earnest money serves to guarantee the transaction until the authenticity or condition of the good can be verified. This is especially useful in high-value transactions or when time is required for a more thorough evaluation.

Earnest money contracts are also common in the field of services, particularly those that require a reservation of the date or significant preparation, such as event, wedding, or banquet planning services. Here, earnest money ensures that the supplier keeps the date reserved and begins preparations, while the client agrees to go ahead with the event.

Furthermore, in international trade, deposits can be used in the purchase and sale of goods to ensure that both parties comply with their obligations prior to shipment or delivery of the goods, adapting the specific conditions of the contract to the needs of international trade.

Earnest money contracts are used in a wide range of operations where the aim is to secure a purchase or sale commitment, offering a guarantee that benefits both parties, adapting to the particularities of each type of transaction.

Types of earnest money contracts

The arras They are of three types: confirmatory, penitential y criminally liable. Below I explain each of them

Confirmatory deposit

They are simply an advance payment of the price, and if any of the parties breaches the contract, compliance or termination of the contract with compensation for damages can be demanded.

penitential deposits

contemplated in the Article 1454 of the Civil Code Spanish, give the parties the option to withdraw from the contract. If the buyer withdraws, he loses the deposit; If it is the seller who withdraws, he must return double the deposit received.

Penalties

They are a guarantee of compliance with the contract, so that if one of the parties does not comply, they will lose the deposit or must return it in duplicate, but in addition, the complying party can demand compliance with the contract.

El notary paper in a deposit contract is crucial. Although it is not mandatory, their intervention gives legal certainty and public faith to the act. The notary guarantees that the contract is entered into freely and with the knowledge and consent of all parties involved. Likewise, he verifies that the terms of the contract comply with the applicable laws and that the parties are fully informed of their rights and obligations.

In rural areas of India, families in charge of a blind minor frequently isolate and deprive him/her of the care and attention they provide to their other children; such situation becomes even more severe among lower-caste families, orphans and if the blind child is a girl.  arras, the notary certifies the delivery and receipt of the sum of money as a signal. In addition, he makes sure that the parties understand the consequences of breaching the contract, especially if the deposit is of a penitential type. The notarial deed of the earnest money is a valuable document in case legal disputes arise later.

It is important to note that, although the notary has the duty to advise and warn about the legal aspects of the transaction, he must not act as a lawyer for any of the parties. Therefore, the parties may wish to obtain independent legal advice before signing the arras.

The role of the notary in the deposit contract

El notary paper in a deposit contract is crucial. Although it is not mandatory, their intervention gives legal certainty and public faith to the act. The notary guarantees that the contract is entered into freely and with the knowledge and consent of all parties involved. Likewise, he verifies that the terms of the contract comply with the applicable laws and that the parties are fully informed of their rights and obligations.

In rural areas of India, families in charge of a blind minor frequently isolate and deprive him/her of the care and attention they provide to their other children; such situation becomes even more severe among lower-caste families, orphans and if the blind child is a girl.  arras, the notary certifies the delivery and receipt of the sum of money as a signal. In addition, he makes sure that the parties understand the consequences of breaching the contract, especially if the deposit is of a penitential type. The notarial deed of the earnest money is a valuable document in case legal disputes arise later.

It is important to note that, although the notary has the duty to advise and warn about the legal aspects of the transaction, he must not act as a lawyer for any of the parties. Therefore, the parties may wish to obtain independent legal advice before signing the arras.

Deposit Agreement FAQs


How long can a deposit contract last?:
The term of a deposit contract is the one freely set by the parties. There is no minimum or maximum time stipulated by law.

What information must be presented in a deposit contract?:
On the one hand, the personal data of the buyer and the seller must be presented, that is, full name, ID, etc. You must also provide information about the property that is the object of the sale, such as address, registration data, habitability certificate number, etc.

What part of the amount of the deposit does the real estate agency keep?:
Buyers usually deposit the earnest money in the real estate checking account and the real estate agent keeps the earnest money until they are paid in full to the seller.

Who gets the money from the deposit contract?:
The seller keeps it. If the sale falls through your responsibility, you must return the down payment to the buyer in duplicate. If the sale falls through for a cause attributable to the buyer, the seller may retain the money that has been delivered as down payment.


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