You put $4,000 down on custom cabinets at a showroom off Steeles Avenue. The delivery date passes, the phone goes unanswered, and when you finally reach someone you are told the deposit is non-refundable. Or a contractor took a third of the price for a basement job in Springdale, showed up for one afternoon and then disappeared. Situations like these are hypothetical here, but disputes about them are familiar. Most of the money is modest by court standards. It still matters a great deal to the person who paid it.
The word “deposit” causes much of the trouble, because the parties tend to mean different things by it. And Ontario law gives consumers a number of rights that may override what is printed on an invoice. Those rights do not make every deposit refundable, however. Sometimes the business is entitled to keep it, or to keep part of it.
Here is a practical look at where you stand. It is general information about Ontario law and not legal advice about your specific contract. The rules below focus on individuals buying for personal or household purposes. Purchases made for a business generally do not get the protection of consumer legislation and depend mostly on the contract and common law.
What a Deposit Actually Is
In law, a true deposit is more than a first instalment. It is an amount paid as security to show that the buyer will follow through. If the buyer backs out without a legal excuse, the seller can generally keep it, and the seller does not necessarily have to prove a loss. A part payment, by contrast, is simply an advance on the price. If the deal ends, a part payment is often recoverable, less whatever damages the other side can prove.
What you call it is not the end of the matter. A court looks at what the parties intended, using the contract wording, the amount and the surrounding circumstances. A $50,000 payment on a $60,000 contract would be hard to characterize as just a security deposit. In some deals, the payment is really for materials purchased right away, and the money may largely have been spent for your benefit.
Even a true deposit has limits. Section 98 of the Courts of Justice Act lets a court grant relief against penalties and forfeitures. The Court of Appeal has said this requires a forfeiture that is out of all proportion to the damages suffered and that it would be unconscionable for the seller to keep the money. See Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, a commercial real estate case. That is a high bar, and arguments of this type are not easy to win, particularly for an ordinary sized deposit.
Your Rights Under the Consumer Protection Act
Most deposit disputes with stores and home contractors fall under the Consumer Protection Act, 2002. The legislature has passed a replacement statute, the Consumer Protection Act, 2023, which takes effect only when proclaimed in force, so check which version applies to your purchase.
Under the 2002 Act, an agreement over $50 where delivery, performance or full payment comes later is generally a “future performance agreement.” It must be in writing, and you must receive a copy. Ontario’s consumer guidance says the document should contain the supplier’s contact details, a description of what you are buying, an itemized price including taxes and shipping, any additional charges, the payment terms and the place of delivery.
Several cancellation rights flow from this.
Late delivery or a late start. Under section 26, if the supplier does not deliver within 30 days after the delivery date in the agreement, or does not begin performance within 30 days after the agreed start date, you may cancel at any time before delivery or commencement. If no date was specified, the 30 days run from when the agreement was entered into. Amended dates count only if you agreed to them in writing. And take care: accepting delivery or letting the work begin after that period can end this right to cancel.
Missing paperwork. If you did not get a written copy with the required information, you may have up to one year to cancel. This is a common problem with small contractors who work from a text message and a verbal quote.
Door-to-door and similar sales. A “direct agreement,” negotiated somewhere other than the supplier’s place of business, such as your home, generally carries a 10-day cooling-off period under section 43. It runs until 10 days after you receive the written copy, and you can cancel without giving a reason. Exceptions and special rules apply, including for certain goods and for work you asked to have begin urgently. So a contractor you met at your door may be subject to different rules from one you approached at a home show or through a storefront. A similar right can apply in cases of online or remote sales, with their own conditions.
Unfair practices. Under section 18, a consumer can rescind an agreement, generally within one year, when the supplier has engaged in an unfair practice, such as a false or misleading representation about what is being sold, a licence, price or start date. If rescission is not possible, you may recover money or damages.
How to Cancel Properly
The law requires notice, and the format matters. Your notice can be given in any way that lets you prove when it was delivered. You don’t need special wording, as long as you make clear that you are cancelling. A registered letter, a courier with signature or an email to an address the business actually uses are all common ways of doing this. Keep proof.
Include your name, the date of the agreement, what you bought and why you are cancelling. Mention the section you rely on if you know it, along with the refund you expect. Cancelling by phone is risky. If you do, note the date, the person you spoke with and what was said, and immediately follow up in writing.
Once you cancel validly, section 96 requires the supplier to refund your payment, and the provincial guidance sets out a 15-day period for doing so.
There is a related protection for card payments. Under section 99, if you paid by credit card and the agreement has been cancelled under the Act, or the payment was received in contravention of it, you can ask the card issuer to cancel or reverse the charge. There is a specific process and timing for this, so ask your card issuer early and put the request in writing. A debit payment, e-transfer or cash does not provide the same protection, which is one good reason to think about how you pay in the first place.
When the Business May Be Entitled to Keep Money
An honest assessment has to cover the other side. Businesses are not always wrong in these disputes.
If you simply change your mind on a valid in-store agreement, and the supplier is ready to perform, there is generally no automatic right to walk away. Ontario law does not require a store to offer a refund for a change of heart. Its refund policy will usually govern, so read it before you pay.
A custom order can be a harder case. If a shop has already had a sofa built to your measurements, or a contractor has bought tile that cannot be returned, the business may be able to keep money or claim damages for real costs. Equally, a retailer who kept your $500 deposit on a mass-market item it resold the next week may have trouble justifying that, depending on how the deposit is characterized. A contract can also set a pre-estimated amount for cancellation, though courts can scrutinize clauses that operate as penalties.
Contractors, too, may have earned part of the money. If they completed some work before you ended the job, the question becomes how much of the payment reflects value received. This can be argued either way, and photographs of the work, invoices for materials and a second contractor’s opinion often settle it. Think, too, about whether you’re the one who ended the contract without a good reason.
Writing the Demand
Many of these disputes can be resolved by a clear letter, partly because the business does not want the time and expense of court. Before you send anything, assemble the contract, invoices, proof of payment, messages and photographs. Then write a calm letter containing:
- A short chronology of what you agreed and what actually happened.
- The specific amount you are asking for, and how you calculated it.
- The legal basis, such as cancelling under section 26 of the Act.
- A firm date for payment, for example 15 days.
- A statement of what you will do if unpaid, such as filing a complaint and starting a claim.
Avoid threats of police or online shaming. A false public accusation can create a separate legal problem for you. It’s perfectly fair to write honest reviews, but keep them factual.
Where Else to Complain
Consumer Protection Ontario accepts complaints about businesses, and the ministry may try to mediate and can take enforcement action. It is worth reading its guidance on filing a complaint, and it maintains a Consumer Beware List you can check before you hire. A complaint will not produce a court judgment, however, and it does not stop any limitation period from running. If the business is a corporation, a corporate profile search will confirm its name and status, which you will want to know if you sue. Many contractors trade under a name that differs from the legal entity that signed the contract, and naming the wrong defendant can waste months.
Going to Small Claims Court
Most deposit disputes fit comfortably within Small Claims Court, which hears claims up to $50,000. For Peel Region, the court is at 7755 Hurontario Street in Brampton. You can represent yourself. Generally you must sue within two years of discovering your claim under the Limitations Act, 2002, and the Consumer Protection Act allows a consumer to bring an action for the refund it requires. A consumer may also be able to seek exemplary or punitive damages under that Act in a suitable case.
Consumer agreements are also protected against some of the fine print you may run into. The Act overrides clauses that try to force you to give up your rights, and a mandatory arbitration clause in a consumer agreement generally does not prevent you from going to court. A clause reading “all deposits are non-refundable” does not displace a statutory right to cancel for late delivery.
If you are facing a claim or thinking about one, think about whether the other party can pay. A small contractor who has already closed down may be hard to collect from, even if you win. A retailer with an operating storefront and inventory is a different matter. Before you pay the filing fee, try to find out whether the business is active and where it holds assets.
How to Protect Yourself Next Time
A few habits make these disputes far less likely. Get written quotes with dates, specifications and a payment schedule tied to milestones. Keep the deposit proportionate to the work, and be wary of being asked for most of the price in advance. Ask specifically whether any portion is refundable and when, and have the answer written into the agreement. Pay by credit card where you can, and avoid large cash payments. Check licensing, insurance and references, and search the name on the provincial Consumer Beware List. If the date slips, get any change confirmed in writing, and be conscious of whether you are agreeing to a new date.
If you already have a dispute on your hands, a short review of the contract and the timeline can tell you which rights apply and whether a claim makes financial sense. Our page on small claim matters explains how those cases proceed, and our contractual litigation page covers larger or more complex agreements. You can also get in touch with us if a deadline or a sizeable deposit is involved.