The arras (deposit) contract explained: what it must contain
Penitential, confirmatory or penal: the type of deposit decides what happens if a party pulls out. Practical guide to article 1454 of the Civil Code.
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The arras contract is the document that legally commits buyer and seller before the deed. Well drafted, it protects both sides and sets the calendar. Badly drafted, it is the leading cause of property litigation.
The three types of arras
Penitential arras under article 1454 of the Civil Code let either party withdraw: the buyer loses the deposit, the seller returns it doubled. This is our default because it preserves the freedom to walk away.
Confirmatory arras are simply an advance on the price. Neither party may withdraw; breach is resolved by ordinary action (specific performance or termination with damages).
Penal arras fix a pre-agreed damages amount but do not allow withdrawal. Developers often use them; they favour the seller.
Essential clauses
Exact identification of the property by cadastral reference and Land Registry details. Realistic deed-signing deadline (30 days is usually a minimum with a mortgage). Allocation of expenses and taxes between the parties. Suspensive condition if the buyer needs financing. Handover of keys and state of the property. Traceable payment method (bank transfer to the account of the registered owner).
Before signing arras we always review the draft and return it with written changes. It is the point of the process with the greatest downstream impact.
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