Understanding Basics Of Escrow ContractsA contract is by definition an agreement between capable parties which can be enforced by law. An Escrow agreement is also a contract. Here we take a look at Escrow Contracts. Escrow is derived from the Anglo-French word escrowe. Escrowe means scrap, roll of parchment. The scrap refers to a deed which is to be delivered to a third person until a future condition is satisfied. Escrow as an arrangement has been prevalent now for centuries. It had its origin in property sale and purchase. Today it is a widely prevalent practice in diverse industries. Escrow by nature is a contract. The basic requirements of a contract are applicable to Escrow Contracts. There can be different provisions in the contract which would depend on the industry or the application of Escrow. Let us look at the basics of an Escrow Contract. An Escrow Contract will have three parties- the Buyer, the seller and the company which is undertaking the Escrow service. The company is referred to as the Escrow agent or simple the agent. The seller is willing to sell an article or carry out an activity for the buyer. The seller has promised certain specifications or characteristics of the product. The buyer would like to make sure that the product is as per the sellers specifications. He needs to make sure that his funds are secure, until he has been able to check the seller's goods. He places the funds with the Escrow Agent, in trust. The seller delivers the items to the buyer. When the buyer is satisfied he asks the Escrow Agent to release the funds to the seller. Escrow as an activity is essential for the success of on line auctions. When you are entering into an on line auction and you agree to escrow the funds to the escrow service, you are essentially entering into an on line contract with the Escrow company. Two very important developments are in the area of Technology Escrow Contracts and Software Source Code Contracts. Technology Escrow Contracts As we said before, the concept of Escrow is the same, irrespective of where it is used. In technology Escrow Contracts there are three parties- the developer, the Licensee and the Escrow Agent. The Licensee has access to use the technology but not to modify or extend it. The developer has the right to extend the technology since the developer by nature will have the intellectual property rights to the technology What happens if the developer at some point of time is unable to support the licensee? This could be on account of a number of reasons. The licensee may stand to loose considerably in the above scenarios. Technology Escrow contracts mitigate such risks as they carry provisions to release the technology to the licensee in certain situations. Understanding how escrow works is useful in case you need to enter into an Escrow Arrangement. Understanding Escrow Contracts will ensure that you are able to use escrow effectively. |