What is a security deposit agreement and when to use it

A security deposit agreement is a contract in which one party deposits a sum of money or an item to secure a future obligation.
If the agreed terms are breached, the deposit may be forfeited; if respected, it is returned.

Common use cases:

• real estate reservation fees,

• public tender participation guarantees,

• B2B contract enforcement,

• pre-contract trust building.

Legal framework

Not separately defined under Czech law, but built upon:

• Section 2010 of the Czech Civil Code,

• Contractual escrow rules,

• and rules of deposit and conditional return.

Can be used as:

• security deposit agreement,

• conditional escrow,

• or advance with penalty clause.

Key elements of the agreement

• Parties and amount of the deposit

• Purpose of the deposit

• Conditions for return or forfeiture

• Method of transfer (cash, bank, escrow)

• Return procedure

• Signature and date

Common mistakes

• No written proof

• Vague conditions for forfeiture

• Disputes about purpose of the deposit

• No reference to related main contract

• Misclassification: gift, advance or penalty?

Recommendations

Depositor:

• Always require written contract and confirmation

• Define when and how the deposit is returned

Recipient:

• Use clear criteria

• For large amounts, use a lawyer or notary escrow

Practice tip

A security deposit is a powerful motivator for both sides.
When written clearly, it prevents disputes and encourages reliable conduct.

Security deposit contract template – available for a symbolic fee

I offer a Czech-English security deposit agreement template.

Suitable for real estate deals, contracts, tenders or private agreements.

Contact me via e-mail or form – fast and practical legal help.

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FINAL THOUGHTS – WHAT NOW?

A security deposit agreement isn’t just a formality – it’s a legal shield, if drafted properly. And a trap, if not.

Do you want to be sure your contract will hold up even in a crisis? Get in touch and let’s schedule a meeting. I am a specialist on contract law – more information here.