A down payment guarantee is a form of insurance that assures the buyer that if the seller does not fulfill the agreed obligation of goods or services, the amount of the advance is refunded to the buyer. This protection allows the buyer to consider that a contract is not valid if the seller does not perform the service and reaffirms the buyer`s rights to the funds initially paid. Advances can be made in some forms – there are payments in whole or in part for goods, progress payments and down payments. Thus, during the settlement of the dispute relating to the recovery of contractual payments in cases A56-32541/2015 and A49-13339/2017, the cassation, appeal and first instance bodies refused the supplier to recover the advance, the penalty clauses for the unpaid amount and the costs of storing the goods. The courts have based their decision on the fact that where the transfer of the goods by the supplier to the buyer is the last dependency of its 100% payment, the goods cannot effectively be considered available to the buyer and the supplier`s obligation to transfer the goods is exported. The same view is supported in the definition of the Supreme Court of Arbitration of the Russian Federation of 7 May 2010, in case A40-94854/08 and in other legal acts of the highest judicial authorities concerning similar cases. In the corporate world, companies often have to pay advances to suppliers when their orders are large enough to weigh on the producer. This is especially true if the buyer decides to withdraw from the transaction before delivery. Advances are usually made in two situations. They may be applied to an amount of money made available before a contractual due date or may be required before receipt of the goods or services requested. I would say that there is a fourth method to control risks when larger advances are paid to suppliers, especially for products manufactured by the customer. It is not surprising that suppliers of technology, aeronautics or other real estate infrastructure require partial payment in advance to cover the materials to be used under the contract.
Each buyer wants the guarantee if the supplier is late in the contract, the deposit is refunded. If the buyer pays in advance, the insolvency, illiquidity or complete bankruptcy of the supplier before delivery may cost the buyer his deposit and leave him without right to the goods. The request for a judicial claim submitted by the supplier, together with the request for recovery of the amount of the advance, does not entail the receipt of the money by the supplier if only the buyer has not refused the goods. The protection of the supplier`s interests requires further action from him. In some sectors, it may be necessary or desirable to use advances to purchase from suppliers to pay for mold parts or cast iron parts, or to give prior assurance to begin construction of a property that can be customized or unique. . . .