Forfeiture/forfeit a process under which a party must give up some benefit. For example, the buyer of goods may forfeit any deposit already paid if they refuse to complete the contract.

JC Smith's The Law of Contract 2021 3 ed, p 477.

The definition above uses "forfeit" when the subject is the "buyer" or payor. I'm familiar with this usage that makes common sense, because it's the payor who pays the deposit to the payee, and it's the payor who must forfeit it.

But if I construed the quotations below correctly, they use "forfeit" even when the subject is the "seller" and payee. This feels unintuitive and wrong, because how can the seller/payee be construed as forfeiting the deposit? The seller/payee didn't pay the deposit! In contrast, the seller/payee benefits from and retains the deposit if the payor forfeits it.

If the defaulting party had already paid money to the innocent party as a deposit, the innocent party may be able to forfeit that deposit. This means that the innocent party can keep the deposit. However, courts have an equitable jurisdiction to grant relief against forfeiture if the deposit itself is extravagant and allowing forfeiture would be unconscionable.

Op cit, p 438.

      The restriction on the parties’ freedom of action which follows from the jurisdiction to strike out penalty clauses is controversial. In Makdessi v Cavendish Square Holdings BV,4 the Supreme Court considered the principles underpinning penalty clauses for the first time in 100 years. Lord Neuberger and Lord Sumption recognised that ‘[t]he penalty rule in England is an ancient, haphazardly constructed edifice which has not weathered well’.5 Similar difficulties surround the equitable jurisdiction to grant relief against forfeiture, which commonly arises where the court holds that it would be unconscionable for an innocent party to retain, or to forfeit, (all of) a deposit already paid by a party in breach. The relationship between forfeiture and penalty clauses will be considered further below.6

4 [2015] UKSC 67, [2016] AC 1172[13]. 5 Makdessi, [3]. 6 See Chapter 28.2.1.

Op cit, p 439.

15.26 A good example of express stipulation by the parties is where an obligation specifies the time of performance and provides that ‘time is of the essence’. This wording means that the time stipulation is a condition, so that even a negligible delay in performance entitles the innocent party to terminate the contract. For example, in Union Eagle Ltd v Golden Achievement Ltd (1997) the contract for the sale of a flat provided that completion must take place before 5 p.m. on a particular date, that time was of the essence and that if the purchaser failed to comply, the seller could retain the purchaser’s deposit. The purchaser was ten minutes late with the cheque, the seller refused to accept it, and forfeited the purchaser’s deposit. This may seem harsh, but the Privy Council agreed that the seller was entitled to do so. Indeed, their Lordships’ sympathy was with the seller, which had been unable to resell the flat for years while the purchaser’s claim was litigated.

Janet O'Sullivan, Law of Contract 2020 9 edn, pp 372-3.

15.38. [. . . ] Likewise in Eminence Property Developments Ltd v Heaney (2010) the vendor of property served a contractual notice giving the purchaser ten working days to complete, but by mistake miscalculated the date on which the notice expired, so purported to terminate the contract and forfeit the deposit after only eight working days. The purchaser argued that this was itself a repudiation by the vendor, but the Court of Appeal disagreed. What the claimant had done had obviously been a mistaken application of the contract, which would have been viewed as such by any reasonable person—it had not demonstrated an unequivocal intention to abandon the contract, required for a repudiation.

Op cit, p 373.

18.18 A deposit is similar to a liquidated damages clause (see para 17.22): in both cases, the contract stipulates that the claimant will lose a sum of money if she breaches the contract. The main difference is a that the former has been paid in advance, so the defendant simply keeps the money that the claimant has already paid (known as ‘forfeiting’ the deposit), whereas the latter only requires the claimant to pay the money over once she has breached the contract. In light of the similarities between the two concepts, it is no surprise that similar rules have evolved to protect against unfair deposits, albeit with different historical routes. For deposits, the principle is that the court has a jurisdiction to give ‘relief ’ against the defendant’s ‘forfeiture’ of the deposit. The similarities between the two principles were expressly noted by the Privy Council in Workers Trust & Merchant Bank Ltd v Dojap Investments Ltd (1993), where a vendor of land was not permitted to retain a whopping 25% deposit when the purchaser did not complete the purchase, and by the Supreme Court in Cavendish Square Holdings BV v El Makdessi (2015), although their precise relationship remains somewhat unclear. Certainly, the Supreme Court envisaged some overlap between the two, although the issue was not before the court of the facts of the case. Lord Mance said that ‘a case may raise for consideration both the penalty doctrine and the power of the court to relieve against forfeiture. In my opinion, that is both logical and correct in principle under the current law.’

18.19 The jurisdiction to give relief against forfeiture is phrased in similar terms to the penalty jurisdiction—a court will not allow a defendant to forfeit (ie, retain) a deposit if it would be oppressive and unconscionable for the defendant to do so (Stockloser v Johnson (1954)). There is some doubt as to whether this protection extends to all types of contracts, or only those concerning the transfer or creation of proprietary or possessory rights (this limitation was suggested in The Scaptrade (1983)), but it certainly extends beyond monetary deposits in land transactions. In Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd (2013), the Privy Council granted relief against forfeiture, in exceptional circumstances of unconscionability by the lender, where the lender had taken security over shares and was seeking to forfeit them.

Op cit, p 458.

  • 2
    In everyday English usage, to forfeit means to lose something as a penalty for doing something wrong. In the examples you quoted, to forfeit seems to be used to describe an action on the part of somebody who retains a deposit as a penalty when the depositor has done something wrong. As it seems to be an exclusively legal usage, I recommend that you pursue it on the Law stack exchange.
    – JavaLatte
    Commented Apr 7, 2021 at 5:54
  • 1
    In legal language, a landlord can 'forfeit' a lease or tenancy, if the leaseholder or tenant is in breach of his or her contractual obligations. The latter is the one who loses something. "If a landlord threatens to forfeit, the tenant needs prompt legal advice about what to do." Commented Apr 7, 2021 at 6:03
  • 3
    Forfeit, vb., sense 2: "to subject to confiscation as a forfeit" ( merriam-webster.com/dictionary/forfeit ). Forfeit, vb., sense 6a: "to confiscate as punishment" ( collinsdictionary.com/dictionary/english/forfeit ). Plus, the meaning is already explained in the quotations you gave us: "forfeit (i.e., retain) the deposit".
    – rjpond
    Commented Apr 7, 2021 at 8:25
  • 1
    It does seem to be a legal usage, so I voted to close it for the same reason as JavaLatte, but on reflection, I'm not sure I see what the Law SE people would be able to add: as the question is currently worded, it doesn't seem to require any answer beyond the readily available dictionary definition.
    – rjpond
    Commented Apr 7, 2021 at 8:57

1 Answer 1


In legal usage "forfeit" can be used in any of several ways. Most commonly it refers to someone who owns something losing it because of their actions. In particular, a would-be buyer who puts down a deposit but breaches the conditions of the contract may forfeit the deposit, with it becoming the property of the would-be seller. This is perhaps the most common usage.

A person who does not own something, but expects to, may forfeit that expectation. When a would-be buyer puts down a deposit as before, but the seller breaches the contract, the seller may forfeit the deposit, that is may lose the right to retain the deposit, with it going back to the would-be buyer instead.

One may also forfeit a right or privilege. Under the older US copyright law, for example, when a copyright holder failed to renew a copyright, the holder was said to forfeit the copyright. When a criminal defendant fails to assert a privilege, such as the privilege of medical confidentiality, the defendant is said to forfeit that privilege.

A thing lost because of incorrect or improper conduct can be called a forfeit, in this case the word is a noun.

If a person does not pay property tax, the property may be forfeit to the state for lack of proper tax payments.

And "forfeit" may be used as a verb to describe the legal process of causing someone to undergo a forfeiture. In this case it is a bit like "foreclose". In the first example above where a buyer puts down a deposit but breaches the contract, the seller may "forfeit the deposit" that is take legal action to secure legal ownership of the deposit, because of the buyer's failure to comply with the contract.

In all these cases something of value is lost because of some failure or improper act on the part of the person who loses it.


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