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IRS Updated information for consumers as of August 16, 2022
What Is a Written Binding Contract?
In general, a written contract is binding if it is enforceable under State law and does not limit damages to a specified amount (for example, by use of a liquidated damages provision or the forfeiture of a deposit). While the enforceability of a contract under State law is a facts-and-circumstances determination to be made under relevant State law, if a customer has made a significant non-refundable deposit or down payment, it is an indication of a binding contract. For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions.

This is still not clear to me, should Rivian have asked for 5% instead of $100 for it to be valid ?
 

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There doesn’t need to be any deposit for it to be a “written binding contract to purchase.” Rivian’s agreement essentially says that when it builds the vehicle you ordered, you have to buy it. The agreement does not cap or set a specific amount for (i.e., “liquidate”) Rivian’s damages if you renege on your promise. Rivian could sue you for its lost profits on the vehicle and any other losses tied to you not buying when the time comes.

Would Rivian actually have damages to go after if you don’t buy? No, because thousands of others will be overjoyed to move up in the queue and buy what you ordered. But that’s a practical issue and not a legal one, so it’s besides the point.

If this agreement doesn’t work it shouldn’t be because of the deposit issue.
 
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