Deposit Bond (ie Bank Guarantee) - Short clause

The Buyers will deliver to the Deposit Holder, by 5.00pm on  ___/___/___ a 'Deposit Bond' issued by _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ for $ _ _ _ _ _ _ _ _ _ which will satisfy the Buyers' obligation to pay that part of the Deposit.  The Deposit Bond must be on the issuer's usual terms and conditions. At Settlement the Buyers must pay the amount of the Deposit Bond to the Sellers by Bank Cheque, in exchange for return to the Buyers of the original Deposit Bond.  If this contract is cancelled, then any money payable by the issuer of the Deposit Bond shall be disbursed as if it were deposit monies.

 (NOTE#1: A Deposit Bond is not necessarily good for Agents - because the collection of commission and outlays from sale proceeds is passed out of the Agent’s control. This causes the same problems as having a very small deposit.)

 (NOTE#2: This clause is very short, and leaves a lot of things "up in the air".  Ideally, the longer version below would be used.)

Deposit Bond (ie Bank Guarantee) - Longer Version

(a) The Buyers will deliver to the Deposit Holder, by 5.00pm on  ___/___/___ a 'Deposit Bond' issued by _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ for $ _ _ _ _ _ _ _ _ _ which will satisfy the Buyers' obligation to pay that part of the Deposit.

(b) The Deposit Bond must be unconditional, irrevocable, and unlimited as to time.

(c) The Deposit Bond must be expressed to be in favour of the Deposit Holder.

(d) Apart from those matters above, the Deposit Bond must be on the issuer's usual terms and conditions.

(e) In the event of a cancellation of this Contract by the Seller, on the grounds of a breach of this contract by the Buyer, the Seller may require the Deposit Holder to call up the Deposit Bond in which case the Deposit Holder is directed to call up the Deposit Bond and the amount paid to the Deposit Holder must be treated as a Deposit.

(f) On Settlement of this Contract, the Buyers must pay the amount of the Deposit Bond to the Sellers by Bank Cheque, in exchange for return to the Buyers of the original Deposit Bond.

(NOTES: A Deposit Bond is not necessarily good for Agents - because the collection of commission and outlays from sale proceeds is passed out of the Agent’s control. This causes the same problems as having a very small deposit.)

Invest deposit

The Deposit Holder is directed to invest the deposit with  _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ on the following terms_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ .

(NOTES: A deposit can only legally be invested if settlement is more than 60 days away, and the settlement date is "fixed", and the Deposit Holder has a written direction to invest from both Buyers and Sellers - section 380 PAMD Act. This clause could be useful with a long contract, or a very large deposit.)

Deposit released early to the sellers

The Deposit Holder is required to immediately release all deposit amounts, as they are received, to the Sellers.  Those amounts then belong to the Sellers, whether or not this Contract settles. The Standard Conditions are varied accordingly. The Sellers agree with the Agent that from these amounts, the Agent may take their commission and outlays, as if Settlement had already occurred.

(NOTES: This clause has the capacity to be extremely unfair on Buyers. In only extreme circumstances, for example a real bargain, would Buyers ever consider such a clause.)

Insufficient deposit

The Sellers agree that at Settlement, the Sellers will owe the Agent balance commission and outlays of $ _ _ _ _ _ _ _ _ _ _ _ _  (after applying the deposit). The Sellers irrevocably direct and the Buyers agree that the Buyers will at Settlement pay that amount from the balance purchase price, by Bank Cheque, to the Agent.  The Buyers irrevocably direct and the Sellers agree that if the Agent is not present at settlement, then the Buyer's solicitors will collect the Agent's Bank Cheque and forward it to the Agent immediately after Settlement.

(NOTES: Agents should always endeavour to obtain enough deposit to cover their commission. Sometimes, however, a deal will not stick unless the deposit is small.  Even with a clause like this, to a large extent the Agent relies on the professionalism of the solicitors for the Buyers and Sellers, and the goodwill of the Buyers and Sellers themselves.)