Bonds and Deposits - The Difference
Over the last few weeks, I’ve had clients raise the following very legitimate question:
What is the difference between a bond and a deposit (or, as I prefer, booking fee)?
This question obviously doesn’t apply to anyone who is providing a service, or providing a physical product that doesn’t need to be returned. In those instances, a deposit or non-refundable booking fee is something pretty clear cut (so long as you word it correctly…we can help with that!).
But what happens if you are hiring items out?
In these instances, you will be asking the question: Do I need both?
The answer is, in my view, yes.
What is a Non-Refundable Booking Fee/Deposit?
As I like to explain (and actually do so in similar wording in my templates), the purpose of a non-refundable component of the price you charge is to secure the Goods and Services on the specific booking or delivery date, and for costs and expenses for work performed in order to prepare for the booking. In the event that that booking is cancelled, the non-refundable component is retained. It provides your security that you will not suffer loss in the event that there is a change of mind.
Please be aware that there seems to be an ongoing confusion (or deliberate resistance) by clients about whether a non-refundable component is actually non-refundable (we say, yes!).
Wording is key.
What is a Bond?
A Bond is charged in instances where you hand over a physical product that will be returned to you once the physical product is not needed. Bonds are most likely to be used when you are providing hire items or equipment for your client to use for a certain period of time, who then return those hire items or equipment back to you once used.
Bonds are vital in instances where the hire items are not returned in the condition it was provided to the client. Where items are damaged or lost, the Bond needs to be sufficient enough to enable you to either replace or repair those hire items. Where the bond is not sufficient to cover the loss or damage to the item, you (as long as your contract allows) can have your client will liable for any costs above and beyond the bond amount in order to repair or replace the item.
Can I have one without the other?
You can run your business the way you prefer. If you don’t want to have a booking fee or deposit, thats completely okay. If you don’t want to ask for a bond, thats cool too. But make sure, when you are deciding what to do, that it is made very clear to the client:
1) the nature of the amount needing paid;
2) the purpose of the payment; and
3) whether the payment made will be kept (and in what circumstances) or whether it will be returned.
The good news…..
The good news is that over the course of the last three years, we have learned a heck of a lot of lessons about how to explain these two concepts within client terms and conditions. Our wording in our supplier specific client terms and conditions templates have been cultivated by being exposed to tens, if not hundreds, of disputes relating to this very issue.
The way in which you word these payments are vital.
Our Client Terms Templates are developed with this issue in mind.
Event Law has worked very hard in this particular area because it is a source of a lot of conflict and confusion.
These easy-to-use, affordable legal templates have been drafted by us, but can be customised by you with our help. These templates are provided to you in word format so that you can continue to use these documents for your business on an ongoing basis.
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