Waarborgsom

A security deposit is a sum of money paid by one contracting party to the counterparty upon conclusion of an agreement as financial security. This amount serves as a buffer against any loss or default in the performance of the contractual obligations.

The security deposit is relevant in a variety of contractual relationships, including lease agreements, construction contracts and supply contracts, as it strengthens the beneficiary’s position and incentivises the paying party to perform its obligations properly. In practice, the amount is typically stipulated in the agreement, is refunded upon termination less any deductions, and offers an efficient alternative to a direct claim for damages.