Escrow
From LawGuru Wiki
Escrow is a legal arrangement whereby an asset (often money, but sometimes other property such as art, a deed of title, website, or software source code) is delivered to a third party (called an escrow agent) to be held in trust or otherwise pending a contingency or the fulfillment of a condition or conditions in a contract. Upon that event occurring, the escrow agent will deliver the asset to the proper recipient, otherwise the escrow agent is bound by his or her fiduciary duty to maintain the escrow account.
Not all escrow agreements impose the duties of a legal trustee on the escrow agent, and, in fact, in many such agreements, escrow agents are held to a mere gross negligence standard and benefit from indemnity and hold harmless provisions.
While escrow is best known in the context of real estate (specifically in mortgages where the mortgage company will establish an escrow account to pay property tax and insurance during the term of the mortgage), escrow companies are also commonly used in the transfer of high value personal and business property, like websites and businesses, and in relation to person-to-person remote auctions (eBay).
Escrow is also known in the judicial context. So called escrow funds are commonly used to distribute the money after a cash settlement in a class action or environmental enforcement action. This way the defendant is not responsible for the distribution of judgment monies to the individual plaintiffs or the court-determined use (such as environmental remediation or mitigation). Defendant pays the total amount of the judgment (or settlement) to the court-administered or -appointed escrow fund, and the fund distributes the funds (often reimbursing its expenses from such the judgment funds).
In some jurisdictions, real estate brokers are considered to act as escrow agents when they accept deposits or earnest money for the purchase of real property. In many jurisdictions, the duties of such agents are codified.
Software source code escrow agents hold source code in escrow just as other escrow companies hold cash.
Escrow is also used in the field of Banking Equipment (such as Automatic Teller Machines - ATMs) and is the function which allows the machine to hold the money deposited by the customer separately, and in case he challenges the counting result his money is returned.
See also
External links
- How to choose an escrow company
- FTC advice on phony escrow services
- Useful definition of Escrow by RGS Legal
de:Treuhänder es:Fideicomiso id:Escrow ja:エスクロー
