Automatic Release of Deposit Clause


This is a Clause contained in a Schedule B to be added to the Agreement of Purchase and Sale. Is it enforceable etc?

RELEASE OF DEPOSIT: Once this Agreement becomes unconditional, should the Buyer fail to complete this agreement on the completion date, at no fault of the Seller, the deposit, together with any interest thereon shall be deemed to be released by the Buyer and paid forthwith to the Seller by the deposit holder, without deduction. Such payment shall be in part-satisfaction of the Seller’s damages and Seller reserves all of Seller’s right to claim further additional damages against the Buyer. Under no circumstances shall this amount be recoverable by or paid back to the Buyer. This clause shall constitute the Buyer’s irrevocable consent to release such deposit and no further written release shall be required.

I was of the understanding a Brokerage Trust holder cannot release funds unless by court order, successful completion of the transaction or Mutual Release…Am I wrong?


Someone would have to jump into the shoes of a Judge and make a determination here about the facts and the law. You know that is not going to happen! However, this particular Listing Brokerage obviously thinks that they can.

No other Brokerage is going to do that.

One of two things are required in order to release the deposit being held on on behalf of BOTH parties:

  1. A Direction signed by BOTH Parties, or
  2. A Court Order.

The Mutual Release contains a Direction BUT it also releases the parties from a potential lawsuit. Only the Direction part is required. No one really cares whether the parties are going to engage in litigation.

Brian Madigan LL.B., Broker

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