ESCROW AGREEMENT

What is an Escrow Agreement?

Creating an escrow agreement is an integral part of any

transaction involving large sums of money; it helps to safeguard
the interests of both parties involved. An escrow agreement is a
legally binding contract between two parties, typically a buyer and
seller, that sets out how funds or other assets are to be stored,
invested and released upon completion of the transaction. It’s
essential to understand why these agreements matter and how
they can benefit all parties involved.

An escrow agreement is a legal contract between two or more

parties that outlines the terms and conditions under which an
asset is held by a third party until certain conditions are met.

The third party, also known as an escrow agent, is a neutral party

responsible for holding the asset and distributing it to the
appropriate party once the agreement conditions have been met.

How Do Escrow Agreements Work?

Escrow agreements are an important part of transactions in a

number of industries like real estate, mergers and acquisitions and
other such complex arrangements. Real estate escrow accounts are
also called RERA escrow accounts.

The following are the basic steps involved in an escrow agreement:

- The buyer and seller sign the escrow agreement, which

outlines the terms and conditions of the transaction,
including:
a. The purchase price
b. The closing date
c. The conditions under which the asset will be transferred
to the buyer
d. The buyer deposits the purchase price into the escrow
account.
e. The seller transfers the asset to the escrow agent.
f. The escrow agent verifies that all of the conditions of the
agreement have been met
 - Once all the conditions have been met, the escrow agent
disburses the purchase price to the seller and transfers the
asset to the buyer

Types of Escrow Agreements

Escrow agreements are used across industries in a number of

transactions. Here are the most common types of agreements:

Real estate escrow agreements: These agreements are used to

hold funds and documents in escrow during a real estate
transaction. The escrow agent will typically hold the buyer’s
earnest money deposit, the seller’s title to the property, and any
other necessary documents. Once all of the conditions of the sale
have been met, the escrow agent will disburse the funds to the
seller and transfer the title to the buyer.

Business asset escrow agreements: These agreements are used to

hold business assets in escrow during a business asset sale or
merger and acquisition. The escrow agent will typically hold the
seller’s assets, such as cash, inventory, and equipment, until all of
the conditions of the sale have been met. Once all the conditions
have been met, the escrow agent will release the assets to the
buyer.

Intellectual property escrow agreements: These agreements are

used to hold intellectual property assets in escrow, such as
patents, trademarks, and copyrights. These agreements are often
used to protect the intellectual property of the licensor in case the
licensee defaults on their obligations under the licensing
agreement.

Software escrow agreements: These agreements are used to hold

the source code of software in escrow until certain conditions are
met, such as the vendor defaulting on their support obligations or
going out of business. This allows the licensee to access the source
code and continue using and maintaining the software in case of a
default.

Importance of Escrow Agreements

Escrow agreements offer a number of benefits to both buyers and
sellers, including:

- Protection for both parties: Escrow agreements protect both

the buyer and seller by ensuring that the terms and
conditions of the transaction are met before the asset is
transferred.
- Reduced risk of fraud: Escrow agreements help reduce the
risk of fraud by ensuring that the asset is held by a neutral
party until the transaction is complete.
- Reduced stress: Escrow agreements can help to reduce the
stress of the transaction by providing both parties with peace
of mind, knowing that the asset is being held by a neutral
party.

Parties in an Escrow Agreement

There are typically three parties involved in an escrow agreement:

- Depositor: The depositor is the party who deposits the

asset(s) into the escrow account. This could be the buyer in a
real estate transaction or the seller in a business asset sale.
- Beneficiary: The beneficiary is the party entitled to receive
the asset(s) from the escrow account once all of the
conditions of the agreement have been met. This could be the
seller in a real estate transaction or the buyer in a business
asset sale.
- Escrow agent: The escrow agent is a neutral third party who
holds the asset(s) in escrow and disburses them to the
beneficiary once the agreement conditions have been met.
Escrow agents are typically licensed and insured financial
institutions.

Escrow Agreement Format

This is what a simple escrow agreement looks like. Complex
transactions between multiple parties would require a more
extensive agreement.

Escrow Agreement

This Escrow Agreement (the “Agreement”) is made and entered into

as of the <DATE> by and between:

<BUYER NAME>, whose address is <BUYER ADDRESS> (“Buyer”);

<SELLER NAME>, whose address is <SELLER ADDRESS>

(“Seller”); and

<ESCROW AGENT NAME>, whose address is <ESCROW AGENT

ADDRESS> (“Escrow Agent”).

Escrow Deposit

Buyer agrees to deposit with Escrow Agent the sum of <AMOUNT>

(the “Escrow Deposit”) on or before <DATE>.

Conditions of Release

Escrow Agent shall release the Escrow Deposit to Seller upon the
following conditions being met:

Buyer has obtained financing for the purchase of the property

located at <PROPERTY ADDRESS> (the “Property”);

Seller has provided Buyer with clear title to the Property; and

All other closing conditions have been satisfied.

Disbursement of Escrow Deposit

Upon the satisfaction of all of the conditions of release, Escrow

Agent shall disburse the Escrow Deposit to Seller within
<NUMBER> business days.
Fees and Expenses

Buyer and Seller shall each be responsible for paying one-half of

the fees and expenses of the Escrow Agent.

Roles and responsibilities of the parties involved in an escrow

agreement

Escrow Agent: Responsible for holding the escrow funds and

ensuring the escrow agreement is followed

Grantor: The party who deposits their funds into escrow

Obligee: The party who is to receive the funds from escrow

Determine the responsibilities of each party involved in the escrow

agreement:

Escrow Agent: Responsible for safeguarding the escrow funds,

administering the escrow agreement, and releasing the funds to the
obligee when the conditions of the escrow agreement are met

Grantor: Responsible for depositing the funds into escrow as

required and following the terms of the escrow agreement

Obligee: Responsible for providing evidence to the Escrow Agent

that they have met the conditions of the escrow agreement in order
to receive the funds

Governing Law

This Agreement shall be governed by and construed in accordance

with the laws of the State of <STATE>.

Entire Agreement

This Agreement constitutes the entire agreement between the

parties with respect to the subject matter hereof and supersedes all
prior or contemporaneous communications, representations, or
agreements, whether oral or written.
Severability

If any provision of this Agreement is held to be invalid or

unenforceable, such provision shall be struck from this Agreement
and the remaining provisions shall remain in full force and effect.

Waiver

No waiver of any provision of this Agreement shall be effective

unless in writing and signed by both parties.

Notices

All notices and other communications under this Agreement shall

be in writing. They shall be deemed to have been duly given when
delivered in person, upon the first business day following deposit
in the United States mail, postage prepaid, certified or registered,
return receipt requested, addressed as follows:

If to Buyer: <BUYER NAME> <BUYER ADDRESS>

If to Seller: <SELLER NAME> <SELLER ADDRESS>

If to Escrow Agent: <ESCROW AGENT NAME> <ESCROW AGENT

ADDRESS>

or to such other address as any party may designate in writing

occasionally.

Headings

The headings in this Agreement are for convenience only and shall
not affect its interpretation.
Counterparts

This Agreement may be executed in one or more counterparts,

each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have executed this Agreement

as of the date first written above.

<BUYER NAME>

<SELLER NAME>

<ESCROW AGENT NAME>