Conventional or judicial escrow: what are the differences?

Escrow consists in entrusting a disputed item or sum to a third party, who is responsible for keeping it and returning it to whoever is entitled to it. The Civil Code distinguishes two forms: conventional escrow, which arises from an agreement between the parties, and judicial escrow, ordered by a judge. Both pursue the same aim — neutralising an asset while a right is being established — but they rest on different logics.

Conventional escrow

It rests on the common intention of the parties, set down in an agreement. They choose the escrow agent, define the subject of the escrow and set out precisely the conditions for release: a specified date, the occurrence of an event, the satisfaction of conditions precedent, or the parties' joint consent. It is the preferred route in business transactions — sale of a business (fonds de commerce), share sale, M&A, real estate share deal — where the parties organise the securing of the price themselves.

Judicial escrow

It is ordered by the judge, generally in the context of a dispute or as a protective measure. Where an asset or a sum is contested between several persons, the judge may entrust its safekeeping to a third party until the dispute is resolved. Escrow then no longer depends on the parties' agreement but on the court decision, which sets its terms.

Comparison table: conventional or judicial

The two regimes differ mainly in their source and their context:

• Source: conventional escrow arises from a contract between the parties; judicial escrow, from a court decision;
• Context: conventional escrow accompanies a voluntary transaction (sale, financing, settlement); judicial escrow forms part of a dispute or a protective measure;
• Choice of third party: freely designated by the parties in conventional escrow; designated by the judge in judicial escrow;
• Conditions for release: set by the agreement in one case, by the court decision in the other.

When to use one or the other?

Conventional escrow is the natural route as soon as the parties agree to secure a transaction: this is the case for the vast majority of price escrows in business matters. Judicial escrow becomes necessary where a dispute already exists and no agreement is possible: a party then asks the judge to entrust the disputed asset to a third party while the merits are resolved. In both scenarios, a lawyer can act as escrow agent.

Fidens puts the conventional escrow of your transactions in place, on a CARPA account. Let us discuss your matter to organise the securing of the price.