Escrow
By Gareth HoyleLast updated How we research
Escrow is an arrangement in which a neutral third party holds money, data or documents until agreed conditions are met, then releases them.
Escrow is an arrangement in which money, property, documents or other assets are deposited with a neutral third party, who releases them only when the conditions in the escrow agreement are met. The Legal Information Institute describes the escrow agent as an impartial intermediary acting on the parties' instructions.
How is escrow used in data deals?
Escrow is used in data deals in two ways. Payment escrow has the buyer deposit the price before delivery, with release on acceptance or after a fixed review period, which protects a seller dealing with a new or overseas buyer. Holdback escrow keeps part of the price back for a period to cover warranty claims, which protects the buyer.
Some deals also use data escrow, where a copy of the dataset or source code is held by a third party and released only on set events. Each escrow adds fees and an agent, so it suits larger deals.
What should an escrow clause say?
An escrow clause should name the agent, the amount, the release triggers, the deadline for each and who pays the agent's fees. Tie release to the acceptance terms in the license, as our licensing agreement checklist explains.