The escrow agreement is the document that governs the entire operation. It is what defines the escrow agent's remit and, above all, the conditions under which the funds will be released. Its precise drafting is the best safeguard against disputes.
The parties and the subject matter
The agreement identifies the depositing party, the beneficiary party and the escrow agent. It specifies the subject matter of the escrow — most often a sum of money — its amount, and the operation to which it relates.
The remit and the release conditions
This is the heart of the agreement. It describes the escrow agent's remit and, above all, defines with precision the release conditions: on a set date, on the occurrence of an event, on the fulfilment of conditions precedent, on presentation of documents, or on the joint agreement of the parties. The clearer these conditions, the less room the escrow leaves for interpretation.
- Term of the escrow and the fate of the funds on expiry;
- Remuneration of the escrow agent;
- Scope and limits of its liability;
- Handling of disagreements between the parties and a dispute-resolution clause;
- Confidentiality of the information in the file.
Anticipating disagreements between the parties
A well-drafted agreement provides for the scenario in which the parties dispute the release of the funds. It then specifies the escrow agent's conduct: maintaining the escrow until an agreement or a court decision, the option to deposit the funds with the court, or referral to a judge. Anticipating this deadlock prevents the escrow from itself becoming a source of dispute and protects the third party's liability.
A tailor-made agreement
There is no standard escrow agreement: each operation calls for its own release conditions. This is why the agreement must be tailored to the nature of the operation and to the needs of the parties.
Do you need an escrow agreement? Fidens draws it up from the details of your file and secures the funds on a CARPA account.
Frequently asked questions
What is an escrow agreement?+
It is the contract that organises the escrow: it identifies the parties and the escrow agent, defines the subject matter and the amount of the funds, the escrow agent's remit and, above all, the precise conditions under which the funds will be released.
Which are the most important clauses?+
The conditions for releasing the funds are the central clause: the more precise they are, the less room the escrow leaves for interpretation. Next come the term, the third party's remuneration, the scope of its liability, the handling of disagreements and confidentiality.
Can a standard escrow agreement be used?+
A template can serve as a starting point, but each operation calls for its own release conditions. An agreement tailored to the nature of the operation and to the needs of the parties is the best safeguard against deadlock.
A transaction to secure?
Fidens sets up the escrow of the price on a CARPA account, under the responsibility of a lawyer.