Legal Question in Business Law in California

Re: Car deposit

It depends on what the overall agreement was. If you took the deposit to hold the car, he could sue for damages. If you told the person that if a better offer came along, you had the right to accept it and refund his deposit, then you can do so.

If you don't have a specific agreement, then the deposit would probably give him the right to purchase the car within a reasonable time. You will probably create a lot of problems for yourself if you sell the car without giving the depositor the right to purchase.

Re: Car deposit

Yes, at least in theory. The usual measure of damages for breach of contract is to give the injured party money damages to reflect 'the benefit of the bargain,' meaning enough money to put him in as good a position as he would have been in, had the contract not been breached.

Suppose, for example, you agreed to sell a particular make and model of car for $5,000, and took a $500 deposit. When you fail to deliver, the would-be buyer finds an almost identical car and buys it at the asking price of $5,750. He may be entitled to $750 from you, not just $500.

Also, you could be liable for consequential damages on top of the basic compensatory damages. For example, suppose the buyer had to rent a car for two days, and also that because rental cars were not immediately available, he missed an important meeting. You could be held liable for the short-term rental of a substitute car, because that is a forseeable consequence of the breach, but it is very unlikely you would be held liable for harm resulting from the missed meeting.

All of this is somewhat theoretical. In most real-world cases, restitution of the deposit will prevent a suit, unless a lot of money is involved or the buyer is really ticked off.

Unless the car were a unique collectible, courts will not make any orders attempting to force you to perform the contract by recovering the car and completing the sale.