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Hi when it comes to contract law there are a few key elements:
1) Offer: The dealer has offered a car to you for a price
2) Acceptnce: You accepted the dealers offer verbally and by your actions
3) Consideration: Money has passed hands and he has now held that vehicle for you
4) Capacity: You were both in a capacity to enter into a contract (unless you are under the age of capacity or mentally incapable in law)
5) Intention to Create Legal Relations: You both intended to do the deal both verbally and by actions
6) Reliance: Based on your agreement and deposit, the dealer has relied upon this and sent the car off for MoT.
I would say, by you wanting to pull out you are then in breach of contract and the dealer has a right to exercise some sort of liquidated damages clause (penalty clauses are unenforceable except for the dreaded ParkingEye parking ticket saga). I would say that you have very little chance of seeing that deposit and the dealer in fairness is not being unreasonable, unless in his standard terms of business he states deposits are refundable within a certain timescale.
In theory, you could argue the retention of the whole deposit constitutes a pentalty clause rather than a liquidated damages clause (which must me a genuine pre-estimate of loss incurred) as he is unlikely to have spent £500 on the MoT and admin associated with the deal. But you would need to test that arguement in court which is entirely not worth it in reality.
I would go back to them and ask for a copy of their T's & C's just to check you don't have a get out and if you dont, then ask nicely for some of it back pointing out they will not have lost £500 in the sale not going through if you cancelled so quickly. Perhaps ask to meet in the middle hoping they are nice. Otherwise you can either go with the car anyway, ask the deposit to be moved to another car on the forecourt or just mark it down to experience.
Good luck
The Broker
Displaimer: Of course the above does not constitute legal advice and should not be relied upon. We recommend you seek legal advise from a professional or CAB.
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