Cancellation Provision

The buyer and seller may negotiate a cancellation fee to secure the performance obligations in case one party decides to cancel a trade.  If one party cancels the trade, the other party gets the gold amount specified in the Cancellation Provision.

 

A Cancellation Provision has the following characteristics:

  • The gold amount is not available to the other party until the performance obligations have been met, or when the trade is cancelled.  A Cancellation Provision is much safer than offering "down payment" because the seller may walk away with the "down payment" and never deliver the good or service.
  • No possible dispute regarding the cancellation.  The purpose of Cancellation Provision is to provide a mechanism to cancel a trade without having worry about a pending dispute from the other party.  It is the responsibility of both parties to pick a cancellation fee high enough to offset the losses associated with a trade cancellation.

Solving the problem of Non-Paying Bidders (NPD)

A non-paying bidder is an individual who had won an auction by placing the winning bid, yet refuses to pay for that auction according to the auction terms.  To solve this problem, a seller may require a Cancellation Provision for all bids.  The cancellation provision may be a fixed amount, such as one gram of gold, or a percentage, such as 5% of the bidding amount.  It is up to the seller to determine which amount is acceptable to offset the inconvenience of dealing with a non-paying bidder, such as restarting the auction or picking another auction winner.

 

During the bidding process, each bid is secured by transferring gold into a Dispute Reserve to cover the cancellation fee.  Before starting a bidding war, the bidder must plan ahead and have enough gold to secure a cancellation provision fee for the highest bid he is willing to make.  The seller has a great incentive to set a small Cancellation Provision requirement, otherwise some bidder may opt-out the bidding process because of insufficient gold to cover their cancellation fee.

 

When the auction ends, the winning bidder has therefore two choices: carry on the auction by transferring the whole amount to the seller in Safetransit™, or cancel the bid which automatically transfers the cancellation fee to the seller.  If the bidder cancels his bid, then the seller has the option to start a new auction, or promote another bidder as the new auction winner.  Once the winning bidder transfers the auction bid in Safetransit, then all other bids are automatically voided and all Cancellation Provisions are fully refunded to their respective bidders.

 

At iGolder, the seller may waive the cancellation fee for a bidder.  For instance, a new bidder with insufficient gold may contact the seller requesting permission to bid without providing any gold in the Cancellation Provision.  It is up to the seller to decide if he accepts bids from him.

 

Example of a Cancellation Provision on behalf of the Buyer

Alice hires Bob as a guest speaker for an important seminar.  Alice needs to make sure Bob will be there, because the audience registering for this seminar wants see Bob, and if Bob is not there, she has to refund her customers.  Therefore, Alice uses the Safetransit™ tool and places 400 grams of gold for Bob, however requires Bob to place a Cancellation Provision of 100 grams.  This way, if Bob cannot make it to the seminar, Alice receives 100 grams of gold from Bob as compensation.  This way, Alice will be able to use the gold from Bob to refund her customers, or perhaps find a replacement speaker while giving a partial refund to her customers.  On the other hand, if Alice cancels the seminar, then Bob will receive his 400 grams of gold, unless specified otherwise in the Safetransit Conditions.  For instance, the Safetransit Conditions may stipulate that Alice pays 200 grams if she cancels the seminar on a 30-day notice, otherwise she pays the full price to Bob for any last minute cancellation.

 

Example of a Cancellation Provision on behalf of the Seller

Alice wants to buy a custom-made sailboat made by Bob.  Bob requires a 20% cancellation provision, so if Alice cancels her order before delivery, then Bob gets 20% of the value of the sailboat, and can therefore try to sell the boat to another customer in hope to recover the remaining 80% of the value.  Notice the Cancellation Provision is different than a "Down Payment" because Bob gets nothing until the boat is delivered to Alice.  In the case of a "Down Payment", Bob would immediately receive 20% of the value of the boat before doing any work, therefore there is always a risk of having Bob taking the "down payment" and default on his obligations.  The Cancellation Provision offers a genuine protection to both the buyer and seller.  Also, the Cancellation Provision allows Alice (the buyer) to cancel her trade without affecting her reputation, and Bob cannot file a dispute about the cancellation because it was mutually agreed on the 20% cancellation fee.

 

The Cancellation Provision may also be useful when the buyer cancelling a trade.  Alice wants to purchase gold by phone and agrees to mail a personal check to Bob.  Bob is willing to reserve the gold for Alice, however requires Alice to provide a 2% cancellation provision.  This way, if Alice decides to cancel her trade, Bob will get a 2% compensation to offset losses associated with an empty reservation.  There are many reasons why the trade may be cancelled.  For instance, Alice's check bounces for insufficient funds, or the check arrives after the deadline of 10 business days, or simply because Alice never send the check because she changed her mind.  Maybe the gold price dropped significantly before Alice wrote the check, or Alice discovered she could purchase her gold somewhere else much cheaper.  In any regards, requesting a Cancellation Provision provides a great incentive to complete the trade.

 

 

 

 

 

As of August 1st, iGolder is no longer accepting new accounts and balances can only be redeemed. During the past months, we have been recommending Bitcoin more than our own payment system. We beleive in physical gold ownership, and developed iGolder as a mechanism for people to acquire physical gold by trading with one another.

Since iGolder has a central point of failure (our server may be raided by thugs wearing some kind of uniform), we feel it is safer for us to cease operations. The iGolder experiment has been personally rewarding as we met many gold enthousiasts and also learned about Bitcoin in the process. For those who have no idea what Bitcoin is, we recommend doing your own research. Bitcoin is far superior to iGolder in every way, both in privacy and security as our server is always vulnerable to confiscation. Bitcoin is a communication protocol with a built-in "escrow service" capable of protecting both the buyer and the seller, rendering our Safetransit completely redundant. To learn more about the Bitcoin protocol and its feature, please watch "http://www.youtube.com/watch?v=mD4L7xDNCmA (Bitcoin 2012 London: Mike Hearn).

For those having gold in their iGolder account, we will ship the physical metal to anyone having more than 1 ounce of gold, assuming the owner is willing to assume the shipping costs. For smaller quantities, we offer to settle in Bitcoin, however we will also settle with any other reasonable payment system. We will give everyone at least two full years to contact us to claim their gold. After that period, any unclaimed gold will go to fund an economic development project in Honduras helping local people to become entrepreneurs.

We sincerely wish you the best in life and hope to keep in contact with you.

Yours in liberty,
The iGolder Team.