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ethical question about deposits


BarryD
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When I first started out I didn't require a deposit.  A customer would call and say they wanted a violin. I would go to work and when I was finished I would contact the customer and they would say "Oh I bought a different violin already".

Now that I have a waiting list, I start losing customers if the list gets much more than a year.

That's just my situtation and your thoughts may be different

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2 minutes ago, BarryD said:

Now that I have a waiting list, I start losing customers if the list gets much more than a year.

That's just my situtation and your thoughts may be different

My waiting list is ~2 years.  I don't ask for a deposit.  If someone drops off the list, I don't care... it will go to the next one.  If the waiting list drops to zero, then I might care.  Or I might just do R&D for a while.

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I've found that requiring a small, totally refundable deposit helps differentiate between those who are semi-serious, and those who just go around tire-kicking, as a form of recreation. It helps me with my planning. If I didn't ask for even a slight token of seriousness, my waiting list might be 50 years, and that would be a bit more than I know how to process and manage effectively.

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I might make full price minus half the deposit refundable, or something like that.   Without a vested interest they could sign up with everybody and just pick the fiddle they liked best, and you could end up with a long list but no sales.  Unless i knew I had the golden touch and could sell anything I made.

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19 minutes ago, David Burgess said:

I've found that requiring a small, totally refundable deposit helps differentiate between those who are semi-serious, and those who just go around tire-kicking, as a form of recreation. It helps me with my planning. If I didn't ask for even a slight token of seriousness, my waiting list might be 50 years, and that would be a bit more than I know how to process and manage effectively.

Exactly

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8 hours ago, David Burgess said:

I'll refund 100% of a deposit at any time for any reason, including if the finished instrument doesn't meet their expectations. What you do is up to you, or could perhaps be based on the advice of an attorney,  taking into consideration what your original understanding or agreement was with the client.

David I have read and enjoyed your website, and I very much respect your sense of ethics. 

I am very happy with my Caron but I would very much like to play a Burgess one day. I think I would like it.

PS David Caron also required a 10% deposit, but it was fully refundable if the buyer didn’t like the instrument.

Edited by PhilipKT
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One of my colleagues had the opposite experience. He put a 10% deposit down on a cello from a Texas maker and then returned to playing his old cello while he waited patiently for his cello to be made.

I frequently asked him about the progress on the instrument and he shrugged his shoulders and said, “Oh, it’ll be done when it’s done. No hurry.”

He finally called me up and said, “Philip the cello is done! I wanna bring it by and show it to you!”

It took seventeen years.

 

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There's always the issue of appearing to be giving legal advice.  Sales in goods are generally covered by individual state's commercial codes, based upon the Uniform Commercial Code (UCC).  For Georgia, this is captured in Title 11, Article 2, Sales.  Everyone involved in selling their wares should really learn the UCC.  I personally know of several unfortunate losses to those in the violin trade based upon provisions of the UCC.  Think five figures.

Here we could have a contract for future goods by a merchant.  Those of you who post on fora as if you know something and then sell a few things that you have described in writing might want to read the definition of "merchant" and about such things as express and implied warranties.  With respect to future goods:  

"Goods must be both existing and identified before any interest in them can pass. Goods which are not both existing and identified are “future” goods. A purported present sale of future goods or of any interest therein operates as a contract to sell"

The contract might be written, or might not be.  Oral contracts are still contracts.  Terms may be fixed in a specific writing, or may be constructed from a pattern of dealing, email communications and so on.  The problem of having a bunch of emails and phone calls with vague terms is addressed by capturing the agreement in writing with a merger clause, that says all that other talking doesn't count, the negotiations are all merged in this.  I am sure all of you have such a clause in your contracts.  Now in most states, as in Georgia, contracts over a certain amount cannot be enforced without a writing, the amount in Georgia I find to be $500. 

But here there's a "deposit."  What is that?   Is it part payment?  What did the buyer intend to get in exchange for it?  Did he get it?  Was the deposit therefore somehow earned?  If the deposit earned something other than the goods, does it really fall under the UCC?  I normally consider the deposit as a pre-payment of the overall price.  That is, the price is $5000, with a $500 deposit that is credited towards the $5000.  If the contract doesn't specify, then what is it and what happens to it upon breach?  Does anyone here want to hire an attorney to figure this out during a dispute?    

It's generally possible to find a UCC solution to any particular business issue without much trouble. It's worthwhile making a contract that has things structured the way the parties want rather than relying upon the backup provisions of the UCC.  As an incentive to consider and learn this stuff, look at misattribution.  I describe an instrument as a 1720 Bonzotoni, and do not place a value upon it.  It sells for $275,000.  There's no written contract, just the advertisement and the cashed check.  However, the buyer gets it checked out, and determines that the hidden signatures inside come from a workshop in Fakatonia, a place well known for making good fakes.  A Fakatonia Bonzontoni is worth $5000.  Buyer likes it, sues the seller.  Of course, it's just caveat emptor, correct?  Wrong.  Remedy is the difference between the value as described and the value as delivered, for accepted goods (I am just pulling this out of my memory, so give some leeway).  Damages are $270,000, assuming that $275,000 was a supportable price in the market.  Really.  I have actually pushed this issue in practice and money has changed hands.  I know of other quiet losses on this issue.  Damages can be $270,000 if $275,000 was the market value even if the instrument only sold for $100,000.  This can really destroy a small business.  And has.  

So have fun out there.  You really do not want someone like me to depose you during a lawsuit, or simply start asking you questions in a small claims trial.  Most people will get eaten alive by any moderately experienced attorney.

 

 

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Bill, they actually can in the absence of suitable disclaimers.  There have indeed been cases like that, just as silly.  Collecting your $1M judgment proves a bit difficult, and the courts aren't too happy to take on nonsense.  

More typical (not that it's common) is the $100,000 antique that's really something different and worth $10,000.  Not headline making, but worth fighting out.

Let me point out that I am simply reporting what's in the UCC in general terms.  Some of this gets pushed fairly often, some doesn't.  It's highly prudent to describe one's goods properly.

UCC claim for delivering non-conforming goods.

Misrepresentation.

Breach of Contract 

Express warranty, implied warranty and so on.  The complaint filed will prove quite disturbing in most serious misdescription cases

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The judges hear cases, but they're very fearsome.  "Mr. Perry, I'm sure you can go out in the hall and settle this case" is pretty much a command to not waste the court's time!  I have written up a settlement agreement on a yellow pad before, and had it accepted by the court.  If you want to be a jerk, best to be very careful if you're an attorney.  Someone who was a jerk to me and others, and not so competent, has a hearing in a Federal court on July 27 to "show cause" why he shouldn't be required to disgorge fees, loose his ability to practice in that court, face other sanctions for misbehavior etc.  But it took years before the court would waste its time on him.  I may go watch, it's only a 500 mile drive!   Some attorneys will do anything for money.  Most will only help people with legitimate and meaningful cases.  At this point, I just want to make some fiddles and ride my motorcycle.  Take care of my partner in her career.  Cook good things.  Might have a cookout Saturday on the South Side Chicago, in the USA, if you're interested!!!

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On the question of ethics, may I divert?

What do you guys do when a customer makes an appointment to buy a branded Cello (Paesold, Eastman  £3000 - £6000 etc) or fitting their cello to cello case (£1000) and spends 1 1/2 hours of my time open or trying every model - and then walks out with a 'thank you,  you have been very helpful'.

Knowing full well that they are going online to get it 5% cheaper! It is happening more and more often now.

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Such a tough question!

Ultimately if you are selling a widely available product for a higher price I don’t think there’s anything you can do.

The shift to online shopping is the reason why our high streets are full of hipster coffee shops and bakeries selling bespoke sourdough half loaves made with a wild yeast they brought back from Mongolia. 

 

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8 hours ago, Stephen Perry said:

 Does anyone here want to hire an attorney to figure this out during a dispute?   

Contracts can also be used to surreptitiously screw people.

How many people here want their clients to need to hire an attorney, in order to completely understand all the potential ramifications of a contract which is imposed on them, including how it interfaces with state law and case law?

How many people even fully understand their homeowners insurance contracts? Filing a claim can be a rather rude awakening!

 

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Mr. Burgess has his finger on the tension inherent in contracting for anything.  Ultimately there's trust underlying all dealings.  Some people can't be trusted.  I worked in a handshake business for a goodly while, where a handshake really did commit to the deal.  Some were reasonably big.  Millions.  If you didn't follow through or tried to excessively manipulate the written documentation of the deal, then there generally wouldn't be a lawsuit, but there wouldn't be any other deals in the industry.  Ever. 

Fortunately, setting up a simple contract that everyone can understand isn't difficult.  If attorneys would get away from trying to second guess every single thing, and would write in plain text, then the process would be much easier.  

Another key Burgess point is that people don't want to understand the contracts they enter into.  It's work, it's scary.  They'd rather trust someone than open a door into that weird world.  But that's how things get crosswise.  That's where agents can be really helpful, but aren't.  Instead of serving to educate about the terms, they mostly want commissions.

So what if someone wants to buy an instrument from a single-person maker?  How does the maker know that person is serious?  Is it fair to charge just to be on a waiting list?  What exactly is one buying?  Is what one is buying part of the "goods"?  I can cast this whole specific issue in several lights, but that's what scientists and attorneys do, and I've been both.  The only thing I can see as being completely defensible is a refundable deposit held in trust.  Anything purchased that can't be simply absorbed by the business gets paid for out of the deposit.  That is, stuff that can't be used by other project.  And there's the rub.  A maker is going to be making things anyway.  So there really isn't some special need, other than buying a place on a list.  Or maybe one is buying the agreed price in 2018 that will be paid in 2021, when new people on the list are paying more.  There's consideration in both directions.  

Would be interesting to see what various makers do.  

Reg has another issue, the death of retail.  Consumers are used to objects being fungible, and pretty much don't accept that a Lorenzo Mancini model violin from online retailer A isn't really going to be the same thing as a Lorenzo Mancini model violin from small attentive shop B.  Once folks realize that the Lorenzo Mancini is identical to the String Fellows Model 12, just with a different label and lower price, they start to resent the violin trade entirely.   I keep thinking about opening a retail shop, and all this contracting and pricing and window shopping and changing nature of business has me thinking that what I really like to do is make things and talk with interesting people, not argue with soccer moms over Johnny's first full size violin and explain that the damage to the rental violin couldn't have "just happened in the case."

 

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Thank you Martin and Steven - I appreciate that! Basically we do charge a small premium precisely because we set up meticulously, carry a large comparative stock and then spend qualified time talking customers through the various options. and this includes advice on care plus a free 1 year service offer. As you both  imply the only route then is an own brand label which may be identical to the shop next door?

I called it ethical because such behaviour is hardly ethical?

I even had one who bought elsewhere - burnt his fingers and then demanded that I service the warranty as being a dealer in that particular brand!

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A few years ago, I had an attorney (primarily a litigator) want to commission a violin. He wanted a written contract which was much more specific than my usual agreements. I thought it might be best to just move on, but eventually proposed that if he would draft the contract, and we could go back and forth with revisions, I might be able to go along with that. So that's what we did. While it wasn't terribly complicated, I can't say that I came close to understanding what the interpretations and ramifications of state and case law might have been, or what sort of potential claims for "damages" could have been alleged, if he wanted to get nasty.

As it turned out, he canceled before the violin was completed, and I refunded his deposit. I felt a sense of relief. :)

A lot of people don't realize that one can be sued for almost anything, whether real or imagined, and even if the plaintiff doesn't win, the costs of defense can be nightmarish. So in some ways, it can be used as a legalized form of blackmail or extortion. "Do what I want", or,  "pay me X number of dollars, or I'm going to cost you 100K in defense expenses."

That's one reason why having settled a lawsuit or claim shouldn't necessarily be considered as an indication of fault of wrongdoing on the part of the defendant. It may simply have been a lot less expensive or more practical, than the anticipated expenses of taking it all the way through trial (assuming that you had the means to take it all the way through the system, without running out of money first).

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I wish more would understand Mr. Burgess's viewpoint.  The judicial system is indeed coercive.  That's the water society gives for us to swim in.  I have been astounded by the typical lack of interest in mediating disputes, in compromise.  It's difficult to disengage and keep things objective. This is true whether considering suing someone, whether being sued, or whether getting too attached to one's belief in magic shrimp shells.  However, keeping objective is what those of us in business need to do, and is helpful elsewhere.

 

 

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There really needs to be a simple contract could include things like total cost, what to do if the buyer can't be found again.  And it could state explicitly that the  buyer can get his money back for any reason during a week-long trial, to make him more comfortable.  It could state you get free adjustments for a month (as opposed to every day for the rest of your life :angry: )

Stephen, I'd be there if I could;; need a break from slumming it.  Burgess isn't so far away.

 

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Just to add a vote for returning the money, my reading, thinking from the point of view of English rather than GA law, though broad ideas of contract are probably not very different, is that you need to return the deposit. Of course for an answer you can rely on, you would need to consult a lawyer qualified in the relevant jurisdiction, which I am not. My own take is that if you had a waiting list, and you were not forced to lower your prices by him pulling out of the deal, and you were not otherwise out of pocket as a result of his breach of contract, you are not entitled to keep the money. If the man broke the agreement and your were out of pocket as a result, the legal answer might be different, as he should compensate you for the losses flowing from his breach of contract, though you might still decide it is not expedient to stand on your rights, bearing in mind that the violin world is relatively small.

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John, US law follows close upon UK law, in general, but with a different spin.  My state of TN (where I no longer live) even has Chancery courts!   

As to damages, in contract in the US, one can put in a liquidated damages clause, and damage amounts may arise from arcane calculations.  In tort law, one really needs to have damages. Other than "he said bad things about me and my feelings were hurt."  Another key is that the defendant has to have money!!  The number of people I've talked to who want to sue someone living in a rotting trailer in the middle of nowhere, or people in bankruptcy, or jail, is absolutely amazing.  There's no pot of state money to be handed out to plaintiffs.  Well, in Chicago, yes apparently.  But that's different.  

I'm feeling better all the time (lingering medical issues), perhaps I'll put together a violin maker's general guide to law.  Although a violin makers' BBQ party would likely be more fun.

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2 hours ago, Stephen Perry said:

 I'm feeling better all the time (lingering medical issues), perhaps I'll put together a violin maker's general guide to law.  Although a violin makers' BBQ party would likely be more fun.

My guide to law can be written quickly: 'stay away from lawyers and courts if you possibly can--as with some doctors, the cure risks turning out worse than the disease'. In my legal days, which are past, I was paid to write a litigation column, no longer online: it was always interesting commenting on the cases which had turned into a nightmare for all concerned, and sometimes meeting the people involved (one litigant pro se, or 'in person' as we say in England, who had beaten Oxford University in the highest court, after losing at first instance and on appeal, told me, 'this is my madness').

BBQ a better idea.

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