Deposit is a long-standing civil remedy in various civil transactions. The deposit method plays a role in enhancing the awareness of fulfilling the obligations of parties in civil contracts. Simultaneously, it is an effective legal tool to protect the rights and interests of parties when the obligations in the main contract are violated. To gain a better understanding of the deposit method, readers can follow this article by TNTP.
1. Definition of Deposit
Deposit is an act whereby one party (hereinafter referred to as the Depositor) transfers to another party (hereinafter referred to as the Depositary) a sum of money or precious metals, gemstones or other valuable things (hereinafter referred to as the deposited property) for a period of time as security for the entering into or performance of a contract.
Deposits are formed through the agreement of the parties when they intend to establish a contract (the deposit agreement is formed before the contract is concluded) or when they aim to secure the performance of obligations in an already established contract. Accordingly, one party will transfer assets to the other, specifically money, precious metals, gemstones, or other valuable assets, to ensure the conclusion or to secure the performance of the contract. Deposited assets serve the dual function of securing the performance of obligations and being used for payment if the transaction is carried out as intended by the parties.
Note: In cases where one party in the contract transfers a sum of money without specifying whether it is a deposit or an advance payment, this amount is considered an advance payment.
2. Forms of Deposit
The Civil Code 2015 (“CC 2015”) does not specifically stipulate the form of deposits. Therefore, parties can agree on deposits verbally, in writing, etc. However, to fully express and clarify the contents of the deposit, as well as to limit risks and protect the legal rights of parties in case of disputes, it is advisable to document the deposit.
A deposit agreement can be expressed through a separate document or as a clause in the main contract. In the case of a deposit to conclude a contract, the deposit must be documented separately because, at the time of concluding the deposit agreement, the contract has not yet been formed.
3. Rights and Obligations of the Depositor
The Depositor has the following rights and obligations:
• Request the Depositary to cease exploitation, use, or the establishment of civil transactions regarding the deposited assets; carry out preservation and maintenance to prevent the depreciation or loss of value of the deposited assets;
• Exchange, replace the deposited assets, or use the deposited assets in other civil transactions with the consent of the Depositary;
• Pay the Depositary reasonable expenses for the preservation and maintenance of the deposited assets. Reasonable expenses are understood as the actual, necessary, and legally acceptable expenses at the time of expenditure that the Depositary must pay to ensure the preservation of the deposited assets without loss, damage, or deterioration;
• Register ownership rights to the assets or perform other obligations as stipulated by the law to ensure that the Depositary becomes the owner of the deposited assets in case the Depositor violates the commitment to conclude or perform the contract;
• Other rights and obligations as agreed upon or as stipulated by CC 2015 and related laws.
4. Rights and Obligations of the Depositary
The Depositary has the following rights and obligations:
• Demand that the Depositor cease exchanging, replacing, or establishing other civil transactions regarding the deposited assets without the consent of the Depositary;
• Take ownership of the deposited assets in case the Depositor violates the commitment to conclude or perform the contract;
• Preserve and maintain the deposited assets;
• Refrain from establishing civil transactions, exploiting, or using the deposited assets without the consent of the Depositor;
• Other rights and obligations as agreed upon or as stipulated by CC 2015 and related laws.
5. Handling of Deposited Assets
The handling of deposited assets is carried out as follows: If the contract is concluded and executed, the deposited assets are returned to the Depositor or used to fulfil the monetary obligation. If the Depositor refuses to conclude the contract or perform it, the deposited assets belong to the Depositary, and the Depositary must return the deposited assets and an amount equivalent to the value of the deposited assets, except in cases with different agreements.
This article “Deposit – Basic content you need to know ” is provided by TNTP for your reference. If you have any issues or questions, please contact TNTP for timely assistance.
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