New Zealand Law
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If you have a contract for the purchase of a car, have paid a deposit and this is conditional upon an inspection, then this is a binding contract. I was not sure from your question whether the seller has cancelled the contract, and why you were not able to inspect. More detail on that would help me answer this better
It appears that they decided to cancel the contract rather than you. The law about cancellation of the contract is contained in the Contractual Remedies Act. You can cancel the contract where there has been a breach of the term, but only if this is a substantial breach. When the contract is cancelled there is an entitlement for damages, but that is only the actual costs. I was not sure if you cancelled the contract or just the inspection?
If you cancelled the contract, which was only subject to an inspection, but chose not to complete the inspection, then the seller is entitled to damages. In terms of getting your money back, you would need to require them to prove their actual expenses rather than just taking the whole of the deposit. But to do this you would probably need to go to the disputes Tribunal, and that won't get you your money in time for the funeral. I suggest that you talk to them again and explain that circumstances were against you, and that you needed the money for the funeral. Explain that your advice on the law is that they can only keep their actual costs and that you would prefer to see justification of those costs before you decide your next steps