A customer pays 2,000 dirhams on ordering, then cancels three weeks later. Must they be refunded? The answer depends neither on the amount nor on the reason for cancelling, but on the word written on the order form — and in most shops that word was chosen without a thought.
The essentials in five points
- A deposit and earnest money have different consequences on cancellation, though they look identical when paid.
- A deposit binds both parties firmly: cancelling is a failure to perform, not an open option.
- Earnest money creates a right to withdraw: either side can back out, at a price known in advance.
- The characterisation is settled at the order, in writing, never at the moment of the dispute.
- VAT follows collection in both cases, whatever becomes of the order afterwards.
1. The difference, one line each
Both sums are paid the same way and for the same apparent reason: to secure an order. What separates them only appears the day someone wants out of the contract.
| Deposit | Earnest money | |
|---|---|---|
| Nature of the commitment | Firm on both sides | A right to withdraw, at a price |
| If the customer cancels | Still bound; the seller can require performance or compensation | They lose the sum paid |
| If the seller cancels | At fault, and owes compensation | Generally returns double, where agreed |
| Common use | Firm orders, made to measure, work started | Reservations, options, sales awaiting confirmation |
| What to write | The word “deposit” and the performance clause | The word “earnest money” and what happens on withdrawal |
The imbalance in the third line explains why traders almost always choose a deposit, and why customers often prefer earnest money without knowing it. This is not a detail of vocabulary: it is how the cancellation risk is shared.
2. Is a deposit refundable?
This is the question asked at the counter, and the honest answer is: not automatically, but it depends on what actually happened, not only on what was written.
- The customer backs out with no reason: The order is still owed. The seller may keep the deposit as compensation where the contract provides for it, or require performance. Refunding is then a commercial gesture, not an automatic obligation.
- The seller cannot deliver: The deposit is returned, and the customer may claim compensation for the loss suffered. This is the mirror situation, and it is often missing from the written terms.
- Performance becomes impossible through no fault: An outside event makes performance impossible: what happens to the deposit follows the contract and the circumstances, in principle restitution.
- The customer refuses a non-conforming product: The failure is the seller’s. The refusal is legitimate and the deposit must be returned, whatever its characterisation.
The fourth line is worth saying plainly to staff: calling it a deposit does not make a non-conforming product acceptable. No word on an order form turns a defective delivery into a fulfilled order.
3. The clause to write before the order
A cancellation dispute turns entirely on what was written beforehand. Five elements are enough, and they fit in three lines on the order form.
- The word chosen, explicitly: “deposit” or “earnest money”, never “advance” or “security”, which say nothing.
- The amount paid and the balance due, with the order total.
- What happens if the customer cancels, in one understandable sentence.
- What happens if you cannot deliver, in one sentence as well.
- The expected delivery date, which sets when a failure to perform can be argued.
- The customer’s signature, which constitutes acceptance of those terms.
The fourth line is the one traders leave out, and the one that makes the clause credible. Terms that only cover the customer backing out look one-sided, and a one-sided clause is hard to defend.
A vague word protects nobody
“Advance”, “security”, “reservation”, “payment”: none of these terms determines what happens on cancellation, and their vagueness works against whoever drafted the document. If the order form does not state clearly whether this is a deposit or earnest money, and what happens on each side, the discussion will be settled on an interpretation of the circumstances — which is to say without the security the payment was supposed to provide.
4. What cancellation changes in the accounts
Whatever the commercial outcome, two points do not change and are regularly handled wrongly.
- VAT was made due by the collection, as for any deposit received, without waiting for delivery.
- If the sum is returned, the adjustment goes through a credit note, not a simple cash withdrawal.
- If the sum is kept, it stops being an advance: it becomes revenue of the year.
- In both cases, the advances received account must be cleared for that order.
- The document justifying the outcome — credit note, letter, signed agreement — is kept with the order.
The third point is the forgotten one: a deposit kept after cancellation is no longer a debt to the customer, and therefore no longer an advance on the liabilities side. Leaving it there keeps alive a balance that corresponds to nothing.
Mistakes to avoid
- Writing “advance” or “security” instead of deposit or earnest money.
- Covering only the customer’s cancellation, never the reverse.
- Believing a deposit makes a non-conforming delivery acceptable.
- Refunding by a simple cash withdrawal, with no credit note.
- Leaving a retained deposit on the liabilities side after cancellation.
- Deciding the characterisation at the dispute rather than at the order.
Frequently asked questions
What is the difference between earnest money and a deposit?
A deposit binds both parties firmly: cancelling is a failure to perform. Earnest money creates a right to withdraw at a price known in advance — the customer loses the sum, the seller generally returns double where that was agreed.
Is a deposit refundable if the customer cancels?
Not automatically. The order is still owed, and the deposit may be kept as compensation where the contract provides for it. Refunding is then a commercial gesture rather than an obligation, unless the failure is yours.
What if the seller cannot deliver?
The sum is returned and the customer may claim compensation. This is the mirror case, often absent from written terms, and its absence weakens the whole clause.
Should a deposit be invoiced?
Yes, showing the VAT, because collection makes it due. The full treatment is set out in VAT on deposits, and the link to the final invoice in the balance invoice.
Does BelloPOS distinguish earnest money from a deposit?
BelloPOS records the collection and its payment method from the free Lite licence onward. The legal characterisation belongs on the order form and in your terms of sale; commercial documents arrive with BelloPOS Pro.
What to take away
Choose the word before you take the money, not after the cancellation. A deposit if you want a firm commitment, earnest money if you accept that either side may withdraw at a known price. Write both directions of the clause, charge the VAT on collection, and clear the advances account whatever the outcome.
Sources
The figures and rules quoted above come from these pages, read on the date given in the article.
- Moroccan Tax Administration, 2026 General Tax Code
- Ministry of Justice, Price Freedom and Competition Law, read 31 August 2026
Collections and documents, tied to the order
BelloPOS records the collection and its payment method from the free Lite licence onward; order forms and deposit invoices arrive with the commercial documents in BelloPOS Pro.
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