Ontario's true-deposit doctrine lets a seller keep a real deposit on a repudiated deal without proving damages — but only within the limits of the Courts of Justice Act's relief against forfeiture.
Short answer
Yes — if the payment is a genuine deposit rather than a disguised instalment of price, Ontario law lets the seller keep it on a repudiated deal without proving any actual loss, because a true deposit exists precisely to motivate performance rather than to compensate a measured harm.
Ontario deposit forfeiture runs on two questions, in order. First: is the payment, on the wording and mechanics of the clause, a true deposit — security for performance — or merely an instalment of the price paid early? The Ontario Court of Appeal in Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, put the doctrine this way: “A true deposit is an ancient invention of the law designed to motivate contracting parties to carry through with their bargains. Consistent with its purpose, a deposit is generally forfeited by a buyer who repudiates the contract, and is not dependant on proof of damages by the other party.”
Second, and only if it is a true deposit: can the buyer still get relief against forfeiture? Ontario's statutory hook is a single sentence — s.98 of the Courts of Justice Act, R.S.O. 1990, c. C.43: “A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.” The Court of Appeal in Redstone restated the operative test as whether the forfeited deposit was “out of all proportion to the damages suffered, and … whether it would be unconscionable for the seller to retain the deposit,” adding that disproportion alone will rarely be enough on its own — the finding has to be an exceptional one, strongly compelled on the facts.
The clause's own wording decides which question you are even asking. A payment described as an advance against the purchase price, refundable on the deal falling through for any reason, reads as an instalment rather than a deposit, and the seller is left proving actual damages like any other claimant. A genuine deposit, sized in reasonable proportion to the price on an arm's-length commercial deal, is very hard to claw back — Redstone itself involved a $750,000 deposit, just over 7% of a $10.225 million price, and the Court of Appeal reversed a lower-court reduction and restored the full forfeiture. A Quebec deal runs on a different, civil-law route entirely, not this common-law doctrine.
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