Legal Definitions - arrha

Arrha refers to a payment, typically a sum of money or an item of value, given by one party to another to signify the formation and confirmation of a contract. It acts as a tangible token or earnest money, providing proof that an agreement has been reached. Depending on the specific terms of the contract, the arrha may be forfeited by the payer if they breach the agreement, or returned (sometimes in a greater amount) by the payee if they are the breaching party. If the contract is successfully completed, the arrha is usually applied towards the total purchase price or returned.

• Example 1: Securing a Unique Art Piece

  A private art collector discovers a rare, one-of-a-kind sculpture at an art gallery. They are very interested in purchasing it but need a few days to arrange for its specialized transport and finalize the payment. To ensure the gallery does not sell the sculpture to another buyer in the interim, the collector provides a small, agreed-upon sum of money to the gallery, explicitly designated as an arrha. This payment formally confirms their agreement to buy the sculpture. If the collector fails to complete the purchase as agreed, they would forfeit this arrha. Conversely, if the gallery were to sell the sculpture to someone else despite the agreement, they might be obligated to return the arrha, possibly even a doubled amount, to the collector.

• Example 2: Custom Furniture Order

  A customer wants a bespoke dining table designed and crafted by a local artisan. The design process, material sourcing, and construction will take several months. To initiate the work and confirm the customer's commitment to the custom order, the artisan requests an initial payment, which serves as an arrha. This payment acts as a guarantee that the customer intends to proceed with the purchase once the table is complete. Should the customer decide not to go through with the purchase after the artisan has invested time and resources into the project, they would typically lose this initial payment.

• Example 3: Booking a Professional Service

  A business is planning a large corporate event and wants to book a specific keynote speaker for a future date. To secure the speaker's availability and prevent them from accepting other engagements for that date, the business provides an upfront booking fee, which functions as an arrha. This payment confirms their contractual agreement for the speaker's services on the specified date. If the business cancels the event without sufficient notice as per the agreement, they would forfeit this booking fee. If the speaker canceled without a valid reason, they might be required to return the fee, possibly with additional compensation.