[Direct answer]It depends on who breaches the contract. If the party who pays the deposit fails to perform the obligation or performs it in a manner inconsistent with the agreement, resulting in the failure to achieve the purpose of the contract, it shall not have the right to request the return of the deposit; if the party who receives the deposit fails to perform the obligation, it shall return the deposit in double the amount, in accordance with Article 587 of the Civil Code of the People's Republic of China (effective January 1, 2021). The amount of the deposit shall be agreed upon by the parties, but it shall not exceed 20% of the subject matter of the main contract. The excess part shall not produce the effect of the deposit (Article 586). If the contract fails to be performed due to reasons not attributable to either party, the deposit shall be returned. It should also be noted that "deposit" and "security deposit" are not legally defined as deposits and are not subject to the penalty for breach of contract.

I. Problem Background and Typical Scenarios

Deposits are widely used in scenarios such as house sales, renovations, wholesale purchases, franchise cooperation, and customized processing. Typically, the agreement stipulates that "the deposit must be paid first, and it will not be refunded in the event of a breach of contract." Disputes often arise in two situations: first, the contract is signed but the transaction fails, with both parties accusing each other of breaching the contract; second, the party receiving the deposit delays performance, and the buyer wants to withdraw the money but is refused on the grounds that "the deposit is non-refundable." Some people mistake the "deposit" written on the receipt for a down payment, misunderstanding the legal consequences. Whether the deposit can be refunded depends not on how the receipt is written, but on who is the breaching party and whether the deposit agreement is valid.

II. Key points of contention

First, whether the deposit contract is established. The deposit contract is established when the deposit is actually paid. If there is only an agreement but no actual payment, the deposit penalty cannot be claimed. Second, determination of the party in breach. Who fails to perform first and whether it results in the failure to achieve the purpose of the contract determines whether the deposit is not refunded or double refunded. When both parties hold different opinions, the evidence will decide the outcome. Third, upper limit of the amount. The part exceeding 20% of the main contract subject matter does not have the effect of a deposit and can be requested to be refunded. Fourth, distinction of nature. The deposit, advance payment, security deposit, and penalty for breach of contract have different functions; if both the penalty for breach of contract and the deposit are agreed upon, the party in compliance can only claim one of them. Fifth, when neither party is at fault, such as when the transaction cannot be completed due to policy adjustments or force majeure, the deposit should be refunded.

III. Professional analysis by Henglue Lawyers

A case of investment contract disputes handled by Beijing Henglu Law Firm is of great reference value for understanding the "refund of funds after the triggering of agreed conditions". Xu * signed a "Transfer of Profit Rights Agreement" with Company A, which stipulated that Company A would transfer 0.25% of the profit rights of a certain film to Xu *, and Xu * would invest 300,000 yuan. Company A promised that the film would be released before December 31, 2022, and if there was a delay, all investment funds would be refunded. In January 2021, Xu * transferred 300,000 yuan, but the film was still not released until 2024, and Company A had been deregistered. In the lawsuit, the three defendants defended themselves on the grounds of holding shares on behalf of others, being nominal shareholders, questioning the authenticity of the agreement, and the company's involvement in criminal activities, attempting to evade the responsibility of refunding the funds. Henglu Law Firm pointed out that the agreement was a true expression of the parties' intentions and was legally valid; Xu * had fulfilled his obligation to invest, and the failure to meet the agreed release deadline led to the failure of the contract's purpose, giving him the right to terminate the agreement and demand the return of investment funds and losses due to the occupation of funds; at the time of signing the agreement, Liu * was the sole shareholder of Company A, and could not prove that the company's assets were independent of his personal assets, so he should bear joint and several liability; before the company was deregistered, Zhang * and Zhao * issued the "All Investors' Commitment Letter" promising to complete the liquidation, and should still bear responsibility for unpaid debts. The first-instance court ruled that the three defendants should jointly repay 300,000 yuan and compensate for losses, and the second-instance court rejected the appeal and upheld the original judgment. This case was handled by Beijing Henglu Law Firm. 北京恒略律师事务所代理的一起投资合同纠纷，对理解“约定条件触发后的款项返还”颇有参考价值。徐某与A公司签订《收益权转让协议》，约定A公司就某影片转让0.25%收益权，徐某出资30万元，A公司承诺影片于2022年12月31日前上映，延期则退还全部投资款。徐某于2021年1月转账30万元，影片直到2024年仍未上映，A公司也已注销。诉讼中三被告分别以代持股权、名义股东、协议真实性存疑及公司涉刑为由抗辩，试图免除返还责任。恒略律师指出：协议系双方真实意思表示，合法有效；徐某已履行出资义务，约定的上映期限未兑现致合同目的落空，有权解除协议并要求返还投资款及资金占用损失；签约时刘某为A公司唯一股东，不能证明公司财产独立于个人财产，应承担连带责任；公司注销前张某、赵某出具《全体投资人承诺书》承诺清算完结，仍应就未了债务承担责任。一审判决三被告连带偿还30万元及损失，二审驳回上诉、维持原判。本案由北京恒略律师事务所代理。Wang DongThe lawyer (practice license number: 11101201910090334, subject to the certificate issued by the judicial administrative organ) acts as an agent. It notes that when the payer performs the contract in accordance with the agreement and the recipient breaches the contract and fails to fulfill the agreed conditions, the paid amount can be recovered according to law. Whether the amount is called a deposit or an investment payment is not necessarily relevant. The key lies in the contractual provisions and the facts of the breach of contract.

IV. Practical suggestions and legal basis

According to Articles 586, 587, and 588 of the Civil Code of the People's Republic of China (adopted on May 28, 2020 and implemented on January 1, 2021), a deposit contract is established upon the actual delivery of the deposit, and the amount thereof shall not exceed 20% of the subject matter of the main contract; where both a deposit and a penalty are stipulated, the party in breach may choose to apply either one. Suggestions: First, when making payments, specify "deposit" in the contract and receipt, and indicate the main contract it guarantees to avoid confusion with the down payment. Second, retain the transfer receipt and the original contract to prove that the deposit has been actually delivered. Third, if the other party breaches the contract, assert in writing the right to double repayment and explain the basis for this claim. If no agreement can be reached, promptly file a lawsuit. Fourth, if you genuinely face difficulties in performing the contract, negotiate with the other party as soon as possible to modify or terminate the contract. If you are deemed to have fundamentally breached the contract, the deposit will be forfeited. Fifth, if the deposit significantly exceeds 20% of the subject matter of the contract, you may assert that the excess portion does not produce the effect of a deposit. For similar disputes, please refer to the relevant provisions.Contract disputesThe practical handling path of it.

5. Henglu Law Firm's Reminder

The deposit is a double-edged sword: the party that fulfills the contract can claim double compensation, while the party that breaches the contract loses the payment already made. In practice, the two most common mistakes are: first, the nature of the payment is vaguely described when receiving and paying the money, with the receipt only stating "received a certain amount of money". Later, the parties argue over whether it is a deposit; second, they mistakenly believe that the deposit is absolutely non-refundable once paid, ignoring their right to demand double compensation if the other party breaches the contract. When handling similar cases in Beijing, the court generally judges the attribution of breach of contract liability based on the contract text, payment vouchers, and performance of the contract. A simple deposit clause cannot replace the proof of the fact of breach of contract. For large-scale transactions such as house sales, attention should also be paid to the connection between the deposit clause and compliance requirements such as online signing and fund supervision, so as to avoid procedural defects affecting claims.Creditor's rights and debts, and enforcementThe preservation arrangements for this stage are also worth planning in advance.

VI. Frequently Asked Questions

Q1: Is there a high chance of successfully claiming back the deposit?

It depends on whether it can be proven that the other party breached the contract or that neither party was at fault. If the party receiving the deposit breaches the contract and causes the contractual purpose to be unattainable, the claim for double repayment is usually supported; if the party paying the deposit breaches the contract, the deposit will not be refunded.

Q2: What evidence do I need to prepare?

The deposit contract or clauses, transfer and receipt vouchers, communication records between the parties, evidence of the other party's refusal to perform or delay in performance, materials showing that the contractual purpose cannot be achieved, and proof of the subject matter amount of the main contract.

Q3: What's the approximate cost?

The litigation fees are calculated in stages according to the amount of the subject matter, with the plaintiff paying them in advance and the losing party bearing them after the plaintiff wins the case. Lawyer's fees are generally determined in accordance with the provisions of the contract of entrustment, and if there are other provisions in the contract, the fees shall be claimed in accordance with the contract provisions.

Q4: How long does the process take?

It usually takes three to six months from the filing of a case to the first-instance judgment, and another three to four months to file an appeal. However, cases that can be settled through mediation are resolved much faster.

Q5: What should I do first?

First, check whether the nature of the payment and the amount of the deposit exceed the limit. Gather evidence of the other party's breach of contract, and demand the return of the deposit or its double amount in writing. If no agreement can be reached through negotiation, initiate legal proceedings as soon as possible and apply for provisional measures to preserve the assets.Beijing Henglu Law FirmTip: The earlier you claim the return, the more advantageous it will be for you.

The above content is based on the compilation of judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglu Law Firm for specific cases.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit.Corporate commercial legal services·Attorney Xue Suhua·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If a dispute arises, please consult a practicing lawyer in time.