The contribution and advance are often seen by contracting parties in principle as an identical legal institution. Such an idea, as common as it is wrong, can bring many difficulties in practice.
In the event of a default, each institution has different legal consequences. So it is worth looking at them and knowing the basic differences between them.
Looking for answers to the question of whether a deposit is more advantageous than an advance or, on the contrary, First,, we must bear in mind which of the parties to the agreement we are or represent
Advance — partial benefit
We're not going to find any rules in the Civil Code defining what we might consider an advance. We use this phrase widely and intuitively, treating the advance as part of the debt we pay in advance for a particular benefit. The advance is therefore primarily attributed to the meaning of the part of the benefit.
From a business perspective, the advance is also often aimed at showing goodwill one of the parties, expressing an increased desire to enter into a contract.
Advance payment of part of the salary or price is often presented where second the contracting party incurs significant costs in connection with the execution of the contract, or even the initial commencement of the work requires financial involvement of the contractor.
Consequently, it must be borne in mind that the advance payment for the benefit is primarily due to the prior payment of part of the price or remuneration. In the event of non-payment, the advance paid to the price or remuneration shall be repayable and shall therefore not fulfil the protective function.
Subordinated mutual member accounts
On the other hand, the institution of the deposit finds its basis in civil law.
Article 394 The Civil Code provides that, in the absence of a different contractual reservation or of a custom, the consideration given when the contract is concluded, it is important that in the event that the contract is not fulfilled by one of the parties, the other party may, without a fixed period of time from the contract, withdraw and retain the payment received and, if it has given it itself, may demand a sum twice as high.
It should be borne in mind that it is only in the event of the performance of the contract that the consideration is credited to the benefit of the party who gave it (for example, the sale price agreed). If it is not possible to credit a deposit not for the benefit, the deposit shall be reimbursed.
In the event of termination of the contract, payments should be reimbursed and the obligation to pay the sum twice as high is out. The same applies to the case where the non-execution of the contract is due to circumstances for which neither party is responsible or for which both parties are responsible.
When deciding on the delivery of a deposit, let the fact that unless the parties decide otherwise, the entitlement to the deposit arises in the event of the default of the contract by one of the parties (this matters when the contract is not properly executed, but is nevertheless executed).
What pays more – a deposit or an advance?
Looking for answers to the question of whether a deposit is more advantageous than an advance or, on the contrary, First,, we must bear in mind which of the parties to the agreement we are or represent.
These institutions have different effects on each party, and it is prudent to consider their possible consequences even before the conclusion of the contract. First of all, the advance is part of the payment (claim) paid in advance for the benefit.
The advance in itself does not fulfil the security function and the price paid is refundable as an undue benefit in the event of default. It does not only have a protective function, which is expressed in disciplining the parties to the conclusion and performance of the contract, but also has a compensation function.
According to the code of the deposit, in the event of default by one of the parties, the other party may, without a fixed period of time from the contract, withdraw and retain the advance received and, if it has given it itself, may demand a sum twice as high.
Author: Michał Skwarek - Council applicant in the legal department Russell Bedford Poland. Graduated from the Faculty of Law and Administration of the University of Warsaw.