Guide · August 2026
Non-refundable deposit policies on Shopify — what holds up, and what courts call a penalty
“Are deposits refundable?” is the question under every deposit policy. This page covers what separates an enforceable non-refundable term from a void penalty in the US, UK, EU and Australia, where the term has to appear, and a clause to start from. It is general information from a software developer, not legal advice — and it says so again where it matters.
The short version
- A non-refundable deposit can be enforceable. Every system covered here draws the same line between a genuine pre-estimate of your loss and a punishment — and the label “non-refundable” does not decide which one yours is. The amount does.
- If nothing was written down when the money changed hands, the presumption runs against you: Georgia’s consumer-protection guidance treats an unlabelled payment as a deposit paid in anticipation of the sale going through.
- Disclosure has to happen before payment, where the customer can see it. The UK standard: a term “an average consumer would be aware of” — not a line in linked terms.
- Size matters everywhere. A term keeping a substantial prepayment “regardless of the circumstances” is the pattern regulators flag first.
- If your goods are made to the customer’s specifications, the EU’s 14-day right of withdrawal does not apply to them. That fear, at least, is misplaced.
- This page is general information, not legal advice. The template below is a starting point for a conversation with a lawyer, not a substitute for one.
Are deposits refundable?
It depends on what was agreed when the money changed hands — and if nothing was agreed, the presumption leans toward giving it back. A deposit is not a legal category with a refund rule attached. It is a payment whose fate is decided by the terms it was taken under, read against whatever consumer law applies where you sell. Write clear terms and, within the limits this page is about, the terms govern. Write nothing and you are relying on a default that does not favour you.
Georgia’s Attorney General Consumer Protection Division was asked exactly this question — a dealership claiming an undocumented deposit was non-refundable — and its published answer is the plainest statement of the default I have found. Where the terms did not specify, “the likely presumption is that you were paying the funds in anticipation of the sale going through; that is, as a deposit”. The refund is a second step in the same answer, and it is conditioned: “If you also agreed that the funds would be returned in the event the sale fell through, then the dealer should be required to refund the money.” That is one state’s consumer guidance rather than a statute, but it is the posture to plan for everywhere: an unlabelled deposit behaves like a refundable one.
So the working question is not “are deposits refundable?” but “what do I have to write, show and charge for a non-refundable term to survive a dispute?” That question has real answers, and one thread runs through all of them: courts do not test the word “non-refundable”. They test the amount, and whether the customer saw it.
The line every system draws
Every legal system on this page draws the same line with different vocabulary. A forfeited deposit that compensates you for a real loss — materials bought, a production slot held and released too late to resell — is enforceable. A forfeiture that punishes the customer for cancelling is not. US doctrine calls the first liquidated damages and the second a penalty, and Cornell’s Legal Information Institute compresses the whole field into one sentence: “While liquidated damages clauses are generally enforceable, courts do not enforce penalty clauses.”
Here is the map. The sections below carry the exact words.
| Where | Governing text | The test a forfeiture must pass | What fails it |
|---|---|---|---|
| United States — sales of goods | Uniform Commercial Code §2-718 | Reasonable in light of the anticipated or actual harm, the difficulty of proving loss, and the inconvenience of other remedies. | “A term fixing unreasonably large liquidated damages is void as a penalty.” |
| United States — common law | Restatement (Second) of Contracts §356 | The same reasonableness idea, applied outside goods sales — services, events, rentals structured as services. | Unreasonably large terms are unenforceable as penalties on public-policy grounds. |
| United Kingdom | Consumer Rights Act 2015, Part 2, with CMA guidance CMA37 (22 July 2026) | Fair under section 62 — and a price term escapes that test only if it is transparent and prominent (section 64). | One-way retention and disproportionately high sums are grey-listed; the CMA flags substantial prepayments that are non-refundable “regardless of the circumstances”. |
| European Union | Directive 93/13/EEC, with Directive 2011/83/EU on withdrawal | No 14-day withdrawal right for goods made to the consumer's specifications; where the right does apply and performance has begun, the consumer pays in proportion to what was provided. | The indicative annex flags terms requiring “a disproportionately high sum in compensation” (item 1(e)). |
| Australia | Australian Consumer Law, section 24(1) | Three limbs, all of which must be proven: significant imbalance, not reasonably necessary to protect legitimate interests, and detriment. | The ACCC has pursued termination fees running to 92.5% of total contract fees. |
United States: liquidated damages, not penalties
For a sale of goods — which is what most Shopify orders are — the governing text is Uniform Commercial Code §2-718. It permits a forfeiture term, “but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy”. Then the sentence to pin above your policy editor: “A term fixing unreasonably large liquidated damages is void as a penalty.” Not trimmed back to a fair number. Void.
The same section also answers what happens when there is no valid clause at all, and the answer is friendlier to sellers than merchants assume. Under §2-718(2), a buyer who breaches and is refused the goods gets restitution only of what they paid beyond the smaller of 20% of their total contract obligation or $500 — and §2-718(3) lets you offset even that with actual damages you can prove and any benefit the buyer took from the contract. On a goods sale, in other words, the statute already lets you keep something modest with no clause at all, and more with receipts. What no amount of drafting buys you is a punitive amount.
Outside goods — services, event bookings, rentals structured as services — the common-law rule is the same idea. Restatement (Second) of Contracts §356 makes a term fixing unreasonably large liquidated damages “unenforceable on grounds of public policy as a penalty”.
The general doctrine is not the whole law, though, because states legislate deposits directly in specific industries. California caps a home-improvement contractor’s down payment at $1,000 or 10% of the contract price, whichever is less (Business and Professions Code §7159) — a different industry from e-commerce, cited here as proof that hard statutory caps on deposits exist. More usefully for made-to-order stores, California’s Civil Code §1723 exempts “customized goods received as ordered” from its retail refund-policy display requirement. Check your own state. This page cannot do it for you.
United Kingdom: fair, prominent, proportionate
The UK has the most concrete regulator guidance in this area, and it is fresh: the Competition and Markets Authority’s unfair-contract-terms guidance, CMA37, dated 22 July 2026. It interprets the Consumer Rights Act 2015, whose core test is section 62(4): a term is unfair if, “contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer”.
A deposit term cannot simply hide behind being part of the price. Section 64 excludes price terms from the fairness test only if they are transparent and prominent — and prominent has a definition: “brought to the consumer’s attention in such a way that an average consumer would be aware of the term”, the average consumer being “reasonably well-informed, observant and circumspect”. A non-refundable line buried in linked terms is not prominent, and a term that is not prominent gets the full fairness test. The exclusion also never applies to terms on the Act’s grey list, and two grey-list entries aim straight at deposits: a term letting the trader keep sums the consumer paid on cancellation “without providing for the consumer to receive compensation of an equivalent amount” when the trader is the one cancelling (Schedule 2, paragraph 4), and a term requiring a cancelling consumer to pay “a disproportionately high sum” (paragraph 5).
What the CMA actually says about non-refundable deposits, at paragraph 6.60:
“A term which makes any substantial prepayment entirely non-refundable, regardless of the circumstances or the amount of costs and losses caused by termination, potentially allows the trader to make an unjustified gain and is more likely to be unfair.”
That is the clause most stores actually ship, described by the regulator.
And what it blesses, at paragraph 6.62: “A genuine deposit may legitimately be kept in full as long as it operates as a binding reservation”, the trader makes the requirement and “the precise circumstances in which it would be non-refundable” clear at the earliest opportunity, those circumstances are “clear and narrow”, and the deposit “will not normally be more than a small percentage of the price. A larger prepayment is more likely to be unfair as it may amount to a disguised penalty.” Read that against a 50% deposit and the design consequence — my reading, not the CMA’s words — is immediate: the larger your deposit, the less of it you can safely make unconditionally non-refundable. A big deposit is fine. A big automatic forfeiture is the problem. Tie the forfeited portion to costs you have actually sunk and the two come apart cleanly.
Sliding scales are addressed directly, and conditionally allowed. Termination-fee terms are more likely to be fair, per paragraph 6.64, if in plain language they set “a stated sum which represents a genuine pre-estimate of loss” — and on sliding scales the same paragraph keeps its distance: “It may be acceptable for a contract to contain a sliding scale of termination or cancellation charges but there must be no circumstances in which they are likely to be disproportionate or punitive.” May be acceptable is not approved. The guidance’s own worked example is a court case, Clipper Ventures Plc v Boyde, at paragraphs 6.66 to 6.67, where a cancellation-charge table survived largely because of how it was shown:
“The terms of the agreement are entirely straightforward on the cancellation penalty. It is shown not in small print but in a very clear form, namely a table of cancellation charges in ascending scale. The layout of the table and ascending nature of the charges introduces clarity and certainty which is desirable in consumer contracts.”
A prominently displayed ascending table beat small print. The CMA notes the clause also reflected the trader’s legitimate commercial interests read against the contract as a whole — but the form mattered, and the form is copyable.
European Union: the custom-goods carve-out
The EU fear merchants repeat is “customers can always cancel within 14 days.” For custom work, that is wrong by the directive’s own text. Article 16(c) of Directive 2011/83/EU instructs member states not to provide the withdrawal right of Articles 9 to 15 for “the supply of goods made to the consumer’s specifications or clearly personalised”. A made-to-measure dress, an engraved ring, a sofa in the customer’s own fabric — the 14-day cooling-off right does not attach. The converse matters just as much: the carve-out is the exception. If the goods are a stock item sold at a distance, the safe planning assumption is that the withdrawal right applies, and a deposit clause is not the tool that removes it.
Where the withdrawal right does operate, the directive is proportionate rather than absolute. A consumer who asks the trader to begin performance during the withdrawal period and then withdraws owes “an amount which is in proportion to what has been provided” (Article 14(3)). Pay-for-work-done is written into EU law directly.
Underneath both sits the EU’s unfair-terms directive, 93/13/EEC, whose indicative annex flags terms “requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation” — item 1(e), the parent of the UK grey-list entry above.
Directives are implemented country by country, so the details differ across member states — one more reason the template below ends with a lawyer, not with a deploy.
Australia: three limbs, all required
The Australian Consumer Law’s unfair-terms test, section 24(1), has three limbs, and the official guide is explicit that “all three limbs of the unfairness test must be proven”: a significant imbalance in rights and obligations; a term not reasonably necessary to protect the legitimate interests of the party it advantages; and detriment if the term is applied or relied on. The middle limb is the drafting instruction — a forfeiture sized to your genuine interests, materials bought and slots held, is defensible in a way a flat punitive sum is not.
The ACCC’s refund guidance cuts both ways for deposits. Consumers are not entitled to a refund under the consumer guarantees for simply changing their mind — but “if a business has a ‘change of mind’ policy, they must follow it”, so a generous policy you advertise binds you. And where a consumer cancels a service over a major failure, the refund may not be a full one, because “the consumer needs to pay a reasonable amount for any work done so far and as expected”.
For what disproportionate looks like in enforcement: the ACCC pursued 1300 Australia over terms letting it charge small-business customers termination fees of up to 92.5% of total contract fees, and secured commitments capping them at the equivalent of three months’ fees where less than three months’ notice is given after the initial contract period, and to refund part of the fee to small-business customers who had complained since November 2016 and paid more than that on contracts terminated after their initial term. Small-business contracts rather than consumer deposits — but the arithmetic the regulator objected to is the arithmetic to avoid.
Disclosure at checkout, not in the fine print
Run back through everything above and one requirement repeats in every jurisdiction: the customer has to have actually seen the term before paying. Georgia’s presumption exists because nothing was written down. The UK’s section 64 protection requires prominence, defined against what an average consumer would be aware of. The deposit the CMA would let you keep in full is disclosed at the earliest opportunity. Clipper Ventures was won by a table shown not in small print. Put those together and the conclusion draws itself: an undisclosed non-refundable term is, functionally, a refundable one.
On a Shopify store the term has four natural surfaces, and my view — practice, not statute — is that you should use all four:
- The product page, at the point where the customer chooses the deposit option. One plain sentence next to the choice — “deposits become non-refundable once production begins” — with a link to the full terms.
- The checkout. Shopify’s own checkout already shows the split — what’s paid today and what’s due later — so the payment structure is disclosed by the platform. The refund treatment of the deposit is the part only your copy can add.
- The order confirmation, so the term the customer accepted is restated in writing they keep. Georgia’s lesson, applied: get it in writing at the time payment is taken.
- Your refund policy page, so there is one canonical, dated statement of the whole policy for anyone — customer, card network, regulator — who goes looking.
One line of drafting discipline from the CMA that costs nothing: state the precise circumstances in which the deposit becomes non-refundable, and keep them narrow. “Non-refundable once we commit materials to your order” is a circumstance. “Non-refundable at our discretion” is the wide discretion the guidance warns against.
Six things an enforceable clause does
Distilled from the statutes and guidance above — each element traces to a source already quoted on this page, so you can check the checklist against the law rather than taking my word for it.
Discloses before payment
At the point of sale, in sight, with the exact circumstances of forfeiture stated — not a line in linked terms the customer would have to think to open. The UK bar is a term an average consumer would be aware of.
Sizes the deposit to the harm
A small percentage of the price, or an amount tied to real committed costs. The CMA puts a deposit that may be kept in full at “not normally more than a small percentage of the price”; flat large sums invite the penalty label everywhere.
Ties forfeiture to sunk costs
Refundable until work or materials are actually committed, ideally with a sliding scale that rises as costs sink. A cliff-edge forfeiture at the moment of order is the pattern regulators flag first.
Cuts both ways
If you cancel, the customer gets an equivalent refund. One-way retention — trader keeps the money when the consumer cancels, consumer gets nothing when the trader does — is on the UK grey list by name.
Exists in writing, from the start
On the order confirmation and the policy page, dated. Georgia's consumer guidance presumes an undocumented payment was made in anticipation of the sale going through — and where both sides understood the money would come back if the sale fell through, the AG says the seller should be required to refund it.
Never exceeds a genuine pre-estimate of loss
The one test that appears in every system on this page. Punitive amounts are void in the US, sit on the UK and EU grey lists as potentially unfair, and are the shape the Australian three-limb test is built to catch. The label “non-refundable” does not rescue the number.
A starting-point clause
What follows is a template, and I want to be precise about what that means: it is a starting point for a conversation with a lawyer who works where you sell, written by a software developer to satisfy the six elements above. It is not legal advice, it has not been reviewed against your jurisdiction, and pasting it unedited is not the move. What it is built to avoid is the clause most stores actually ship — “all deposits are non-refundable” — which is precisely the substantial-prepayment-non-refundable-regardless pattern the CMA flags, and the unreasonably large fixed forfeiture the UCC voids.
Template — adapt with a lawyer, don’t paste blind
Deposit terms for custom and made-to-order items
Custom and made-to-order items require a deposit of [your deposit — e.g. 25% of the order total] at checkout. The remaining balance is charged to the payment method saved at checkout [when the balance is due — e.g. 30 days after your order is placed, or when your order ships].
Your deposit is fully refundable until [the point your costs actually begin — e.g. we commit materials to your order and reserve a production slot, normally within 5 business days of your order]. Cancel before then, for any reason, and we refund the deposit in full.
After that point, your deposit covers materials and work already committed to your order. If you cancel, we retain [what you keep — e.g. the portion of the deposit corresponding to costs we have incurred, up to the full deposit] and refund the rest. [Optional, and better on long lead times: a short ascending table of retention amounts by stage, displayed with these terms.]
If we cancel your order for any reason other than your breach of these terms, we refund your deposit in full.
Nothing in these terms limits any right you have under applicable consumer law that cannot be excluded by agreement.
Three deliberate choices worth keeping when you adapt it. The fully-refundable window up front is the binding-reservation shape the CMA describes. Retention tied to incurred costs rather than a flat sum is the genuine pre-estimate every system on this page asks for. And the mirror clause when the seller cancels answers grey-list paragraph 4 directly. If your lead time is long enough that costs sink in stages, the ascending table is not decoration — it is the exact form a court praised in Clipper Ventures.
The Shopify mechanics under the policy
A policy is only as good as what your checkout can actually do. On Shopify, a deposit taken at checkout is one order with two payments — the deposit charged today, the balance charged later to the card Shopify saved. The mechanics, including the free manual route and the Plus-only native ones, are covered properly in taking a deposit on a Shopify custom order, and choosing the split itself — which this page argues should shape how much of it you make non-refundable — is covered in how to take a 50% deposit on Shopify.
Two mechanics bear directly on refund policy, and a clause written without them will promise something the checkout cannot do. First, Shopify cannot refund a deposit as a thing of its own. The clearest published statement comes from a deposit app’s own documentation rather than from Shopify — “Currently Shopify cannot refund just a deposit or just a future payment” — and I could not find a first-party Shopify sentence on it. Returning money is a refund of an amount against the order, handled like any other refund. So a clause promising to retain the portion corresponding to costs incurred and refund the rest is executable, but you execute it by working out the number yourself, not by refunding “the deposit”.
Second, cancelling the order removes the saved card. From the same source: “Cancellations will remove the card on file for a given order to prevent accidental charges.” Cancel the order in Shopify as usual and DepositDesk sees the cancellation and stops the scheduled balance charge automatically — but the cancel is a one-way door. There is no cancel-then-reinstate path back to collecting the balance, because there is no way to re-vault the card against that order. Never cancel an order you still intend to collect on; if the customer wants to pause rather than cancel, that is a conversation, not a cancellation. Both mechanics are worked through at length in deposit accounting on Shopify. Whether a deposit is refundable at all stays your store’s policy call — which is exactly why the policy needs writing.
The other way a deposit order dies is not a cancellation at all: the balance charge fails, the customer goes quiet, and your policy meets reality. That scenario has its own page — when the second deposit payment declines — and if you do end up retaining a deposit, how it lands for tax is covered in sales tax and VAT on Shopify deposits.
If the policy fear was the thing holding you back from taking deposits at all, this is the part where I tell you what I build. DepositDesk is a $29-a-month flat-rate deposits app for standard Shopify plans, with a 14-day free trial, no per-transaction fee, no revenue share and no cap on order value. Percentage or fixed deposits, with the balance due a set number of days after checkout, on a date, or when you fulfill the order — charged automatically to the card Shopify saved, with retries after 1, 3 and 7 days, an email to the customer each time a charge fails, and the order flagged for you when the ladder runs out. For working out what a given split means in dollars before you write it into a policy, there is a free deposit calculator on this site too.
Its real limits, stated the same way everything else on this page is: Online Store channel only — not POS, not B2B, not draft orders. It needs an Online Store 2.0 theme, because the deposit option is a theme app block you add in the theme editor. It needs one of the four vaulting-capable gateways — Shopify Payments, PayPal Express, Stripe, or Adyen. It is one deposit plus one later balance, not an instalment plan. And nothing in it writes your refund policy for you: the app enforces the schedule, and the policy stays yours.
Questions merchants actually ask
Are deposits refundable by default?
If nothing was agreed when the deposit was taken, expect the presumption to run toward refundable. Georgia's Attorney General consumer-protection guidance, answering exactly this question, says an unlabelled payment is likely presumed to have been paid in anticipation of the sale going through — that is, as a deposit — and that where you also agreed the funds would be returned if the sale fell through, the dealer should be required to refund the money. That is one state's consumer guidance rather than a universal statute, but it is the default posture to plan for: a non-refundable deposit has to be made non-refundable, in writing, before payment.
Can I make a deposit completely non-refundable?
You can write the term; whether it survives a dispute is a different question. The UK's CMA guidance flags a term making any substantial prepayment entirely non-refundable regardless of the circumstances as more likely to be unfair, and US law voids unreasonably large forfeitures as penalties. The safer shape in every jurisdiction covered here is forfeiture tied to costs you have actually incurred, with a full refund if you are the one who cancels.
Are non-refundable deposits legal in the UK?
Yes, within limits. The CMA's guidance says a genuine deposit may legitimately be kept in full if it operates as a binding reservation, the requirement and the precise, narrow circumstances of forfeiture are disclosed at the earliest opportunity, and the deposit is not normally more than a small percentage of the price. A larger prepayment kept in full is more likely to be treated as a disguised penalty.
Do EU customers have a 14-day right to cancel a custom order?
Not for goods made to their specifications or clearly personalised — Article 16(c) of Directive 2011/83/EU excludes those from the withdrawal right entirely. For stock items sold at a distance the 14-day right is the rule, so the safe planning assumption is that it applies, and the distinction between custom and stock is the first thing to get right in your policy.
What makes a deposit clause an unenforceable penalty?
Size out of proportion to your real loss. Under UCC §2-718 a term fixing unreasonably large liquidated damages is void as a penalty; the Restatement applies the same rule outside goods sales; and the UK and EU grey lists flag disproportionately high sums by name. Courts test the amount against your anticipated or actual harm, not the label you gave the clause.
Where should a non-refundable deposit term appear on a Shopify store?
Before payment, where the customer choosing the deposit will actually see it: next to the deposit option on the product page, restated on the order confirmation, and in full on your refund policy page. The UK standard is a useful bar everywhere — a term an average consumer would be aware of. A sentence in linked terms and conditions that nobody opens does not clear it.
Can I keep the deposit if I cancel the order myself?
Plan on no. A term letting the trader keep sums paid when the consumer cancels, without an equivalent payment running the other way when the trader cancels, is listed as potentially unfair in the UK Consumer Rights Act's Schedule 2, and the one-sidedness itself is what regulators object to. The template on this page refunds the deposit in full when the seller cancels, and that mirror clause is there deliberately.
Sources for this page: Uniform Commercial Code §2-718 and the Legal Information Institute’s penalty-clause summary (Cornell Law School); California Business and Professions Code §7159 and Civil Code §1723; published consumer guidance from Georgia’s Attorney General Consumer Protection Division; the UK Consumer Rights Act 2015 (sections 62 and 64 and Schedule 2) and the CMA’s unfair-contract-terms guidance CMA37, dated 22 July 2026; EU Directives 2011/83/EU and 93/13/EEC; the Australian Consumer Law unfair-terms guide with ACCC guidance and enforcement releases; and a third-party deposit app’s published documentation for the two Shopify refund/cancellation quotes — all read August 2026. This page is general information, not legal advice, and no web page replaces a lawyer who works where you sell. If you find something here that is wrong, I would rather hear it: support@depositdesk.app.