A settlement is the contract by which the parties put an end to a dispute — whether existing or potential — through reciprocal concessions (article 2044 of the Civil Code). Its effectiveness depends on each party performing its undertakings. Placing the agreed sums in escrow provides that security.
Securing reciprocal performance
A settlement often balances a payment against a withdrawal of proceedings, a waiver or the handing over of documents. Placing the sums in escrow makes it possible to synchronise these obligations: the funds are released to the beneficiary only once the other party has performed its own obligation, which removes the risk of one party being paid without the other obtaining its consideration.
A neutral third party between parties in disagreement
In a dispute, the trust between the parties is by definition damaged. The escrow agent, being independent, holds the funds and mechanically applies the release conditions set out in the settlement, without any party being able to dispose of them unilaterally.
Synchronising payment and withdrawal of proceedings
The main contribution of the escrow is to resolve the problem of the order of performance. Without a trusted third party, each party hesitates to perform first: the debtor fears paying without obtaining the withdrawal, the creditor fears waiving without being paid. By placing the funds in escrow as soon as the settlement is signed, the settlement becomes safely enforceable: the third party releases the sums upon proof of the withdrawal of both the proceedings and the claim, or of the performance of the agreed obligation.
The lawyer's framework
Entrusted to a lawyer, this escrow benefits from the CARPA account and from professional secrecy. The sums are ring-fenced on a dedicated sub-account and their release is traceable, which gives the settlement agreement its full effect.
Are you finalising a settlement that ends a dispute? Fidens places the agreed sums in escrow and arranges their release upon performance of the undertakings.
Frequently asked questions
What is a settlement in legal terms?+
It is the contract by which the parties put an end to a dispute, whether existing or potential, through reciprocal concessions (article 2044 of the Civil Code). Between the parties, it has the authority of res judicata and prevents or extinguishes litigation.
Why place the sums of a settlement in escrow?+
To synchronise the performance of the reciprocal undertakings. The escrow guarantees that no party will be paid without the other having performed its consideration — withdrawal of proceedings, waiver or handing over of documents — which secures the agreement in a context where trust has been damaged.
Is the escrow agent neutral between the parties in dispute?+
Yes. Being independent of the interests involved, it merely applies the release conditions set out in the settlement, without any party being able to dispose of the funds unilaterally.
A transaction to secure?
Fidens sets up the escrow of the price on a CARPA account, under the responsibility of a lawyer.