Escrow Agreement (Drafting)

Escrow agreement is an agreement to assure one of the parties that the other party will fulfill its contractual obligations. An Escrow agreement is a legal contract in which an independent third party holds the money or the asset until certain conditions viz. delivery or payment, are fulfilled. For instance, when one agrees to sell gold to any company, the buyer will deposit the payment to the escrow party. This escrow party will hold the money until you deliver the goods and will tell the person making an escrow account that it holds the deposit for them. Once you deliver the goods, the escrow party will transfer the money to the person who has opened the account.

Escrow ensures that your counter party will perform its obligation such as payment or delivery of goods/services. The contract is based on the mutual trust of the parties. However, there is always the risk that your counterparty will not pay you or deliver the goods/services to you. Escrow agreement ensures that the payment is already deposited to escrow account, so your payment is safe. You will receive your payment once you fulfill your part of the agreement. Escrow eliminates the risk and guarantees that contract is fulfilled. Escrow is especially useful when you don’t know the other party or they are a foreign partner and you are doing business with them for the first time.


Features of Escrow Agreement:


1.IDENTITY OF THE ESCROW AGENT:the agreement must clearly identify whether the person who is appointed as escrow agent, will be an attorney, a bank or another third party.


2.ESCROW AGENT’S FEES AND EXPENSES:  It should be determined in advance through escrow agreement - Who will bear for the costs of escrow and who shall be responsible for additional expenses in case the escrow agent holds the deposits longer than expected because of the mistake of a party.


3.THE DUTIES AND LIABILITIES OF THE ESCROW AGENT:The must clearly define what the escrow agents should do. This includes under what circumstances the authorized person can release the amount in escrow account.


4.ACCEPTABLE USE OF FUNDS BY ESCROW: A provision can be included in escrow agreement about howthe escrow agent use the money. It includes lending and interest on the deposits, specify whether your escrow agent is able to keep any interest that is generated because it is holding funds on escrow.


5.THE JURISDICTION FOR LEGAL ACTION:The parties to the escrow agreement and the escrow agent may all be in three different country. This is rathera frequent situation occurs in international contracts. For any dispute about the escrow funds and liabilities of escrow agent, parties should choose a jurisdiction to resolve your legal issues.


Passport Photo

Passport photo of all parties.

PAN Card

PAN card of all parties.

Aadhar Card

Aadhar card of all parties.

Utility Bill

Utility bill of Electricity or Telephone.

Address Proof

Valid Address Proof of all the parties.


Valid Driving Licence of all the parties.

Terms and Conditions

Terms and Conditions between the parties.

Other Documents

Other documents will be intimated through e-mail.


An Escrow agreement is a legal contract where an independent third party holds the money or the asset (i.e. in 'escrow') until certain conditions such as delivery or payment, are met. ... This escrow party will hold the money until you deliver the goods and will tell you that it holds the deposit for you.

How Escrow Agreements Work. In an escrow agreement, one party usually a depositor ,deposits funds or an asset with the escrow agent until the time that the contract is fulfilled. Once the contractual conditions are met, the escrow agent will deliver the funds or other assets to the beneficiary.

Mortgage lenders prefer escrow accounts especially for property tax payments, as they don't want the property, backed by their mortgage loan, to fall behind in taxes and risk a tax lien on the property.

You pay escrow to seal the deal after a property owner accepts your offer. While these funds show the seller you're serious about purchasing the dwelling, if you can't close the loan, you could lose your escrow money. However, everything depends on your sales contract and the contingencies included.

Escrow is the use of a third party, which holds an asset or funds before they are transferred from one party to another. The third-party holds the funds until both parties have fulfilled their contractual requirements.

Worst case scenario, you lose the financing, your deposit and the chance to buy a home altogether, if your loan falls out of escrow. However, you can protect your deposit and get a bit more time to find new financing if you include certain provisions in the sales contract.