That's a tough one because they never actually signed the contract. That is why I tell parents that I cannot secure the spot for them until I have both the signed contract and the deposit...then it is clear. You should not have to return the deposit, but then, how can you prove that it was a deposit if there is no contract signed? Not sure how a judge would view that in court. Maybe someone else has some better advice, but I would probably chalk it up to experience and return the deposit.
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