A down payment is an initial payment of a portion of a purchase price, paid by a buyer to a seller upon the execution of a sale agreement (note: agreement and contract are synonymous for purposes of this definition). A down payment serves both as partial performance and as security for the full performance of the agreement. If performance is not completed as required by the contract, the down payment may be forfeited or returned, depending on which party is deficient in their performance.
See also earnest payment.
[Last updated in June of 2021 by the Wex Definitions Team]