Guard-IT Software Escrow: The Escrow Advisor

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General Protocol for Escrow Release

If you are a Party to an escrow agreement with a reputable escrow firm, it is highly unlikely that any frivilous or "knee-jerk" release or transfer of the escrow deposit materials would occur (unless such is prescribed in the Release Conditions).

A general notice/release protocol is presribed in most escrow agreements and it must be strictly adhered to by the escrow agent. This is to benefit both Parties and ensure that other means of repairing a potential escrow release condition have been explored or exhausted before any deposit materials are transferred to a Beneficiary. As an aside, know that in most escrow agreements, title to the deposit materials is not transferred to a Beneficiary, only the right to use the deposit materials in accordance with the corresponding license agreement. Any transfer of title would be handled outside of the escrow process.

Protocol begins with the escrow agent's receipt of a Release Request, or written notification submitted in good faith by a Beneficiary, that the Developer has gone out of business or met some other release condition per the escrow agreement. It is the escrow agent's duty to then forward a copy of the request to the Developer and allow an objection period (usually 10 days or so) for the Developer to reply with contrary instructions, stating that a release condition has been resolved. If contrary instructions are received and the release condition is not resolved within the objection period, the issue may proceed to commercial arbitration or other alternative dispute resolution (ADR).

In clear-cut cases where a bankruptcy filing has occured, the objection period will lapse with either no reply or a consent from the Developer, and the deposit materials are then transferred to the Beneficiary by the escrow agent. With the release or transfer of the escrow deposit materials, the escrow agreement is terminated.