I think it's probably an idea to find out what constitutes as a "contract"... from my understanding and studies, there must be the following:
1) Parties Involved (buyer + seller)
2) An Offer (in this case sale of the car)
3) Terms (payment; times etc.)
4) Termination of Contract (what happens when either party fails to carry out their part)
I think I have also read somewhere that a verbal agreement is just as binding as a written agreement. As mentioned, this is one word against another in court so not much to grasp. However, if your friend can prove he got the car inspected on the "reliance" that the contract would continue to the end, then there is a case. This shows that he was acting in ways to fulfil his part of the contract (purchasing the car).
Also, a deposit is merely to indicate that you have an "interest" in the item/s. This does not reserve you full rights to the purchase - someone else could come along and pay the entire amount, voiding your deposit (which should be returned).
Important note; if you give someone a deposit on a car (or anything for that matter), should make it very clear as to whether or not it is refundable if you decide not to go ahead. Many times people (me included) have been caught out for stuff such as ticket bookings etc.
Just some thoughts, don't hold any of it against me if it's wrong - just going by some knowledge and common sense.