About Escrow
ESCROW ACCOUNT
An escrow account is an account designed to safely hold funds temporarily. The escrow provider should be a disinterested third party with no preference about who ultimately receives funds from the account.1 For example, in a real estate transaction, the escrow account does not belong to the buyer or seller.
WHAT IS AN ESCROW AGREEMENT?
An escrow agreement is an agreement between the depositor (usually the buyer), the beneficiary (usually the seller) and us acting as a fiduciary.
In this tripartite agreement, the depositor and the beneficiary agree on the trust relationship which we join as trustees.
According to this agreement, the depositor deposits a certain document or amount with us as escrow agent. While the transaction is being finalized, these monies are held safely and independently in our escrow account. The depositor therefore transfers his obligation to pay the beneficiary to us, because in the escrow agreement the depositor has stipulated that the escrowed funds must be released to the beneficiary only when the beneficiary completes an obligation or series of obligations as set out in the escrow agreement. Until then, the funds remain in the trust account.
Should the beneficiary fail however to fulfil its agreed contractual obligations, the depositor reserves the right to recover the funds from the escrow agent and reverse the transaction
IN DETAIL:
To achieve the necessary trust, the escrow agreement must define clearly the following.
Contractual obligations
The specific contractual obligations of both parties, i.e. the depositor and the beneficiary including deadlines, quality standard and the exact amount of the escrow funds to be deposited.
Inspection period
Once the beneficiary has duly fulfilled their obligation and made the goods or services available to the depositor, the verification period begins. This is the period during which the depositor has the right to examine and then accept or reject the beneficiary's goods or services. This right of refusal depends on quality, quantity or other parameters to be clearly stated in the trust agreement, as well as on the number of days foreseen for its performance. Upon successful completion of the inspection and receipt of the associated notification Daness Legal will pay the beneficiary on behalf of the depositor.
Explicit instructions
from the depositor The escrow agreement must specify in detail the express instructions to be fulfilled before the escrow funds are to be released to the beneficiary.
Dispute settlement mechanism
The escrow agreement must specify the method of dispute resolution such as the competent court, arbitration or mediation as well as applicable law. It must also clearly specify what happens if the resolution fails.
Final terms
In general, an escrow account is closed after the successful completion of a transaction between the depositor and the beneficiary or when the depositor makes a payment, if the beneficiary fails to meet its contractual obligations.
The agreement must explicitly specify how and when any escrowed funds are to either party – account number, banking details etc. It should clearly describe the underlying transaction and the circumstances leading to the closing of the escrow account.
In international transactions, it must also indicate the agreed exchange rate and currency.
Our fees
In contrast to the statutory fees in Singapore, Europe and United Kingdom, we agree upfront a transparent flat fee with the parties involved. This fee is commensurate with amount of the escrow funds or assets in the transaction, the duration of the escrow and due diligence required.
ESCROW SIMPLIFIED
An escrow is a contractual arrangement in which a neutral third party receives and disburses money for the primary transacting parties e.g., buyer and seller. The advantage of an escrow protects both parties by keeping the payment in a secure escrow account e.g., an attorney’s trust account, which is only released when all of the terms of an agreement are met as overseen by the neutral escrow attorney. The Escrow Attorney is NOT AN ATTORNEY FOR EITHER PARTY.
Escrows have been trending in the CBD oil and cryptocurrency industry. In such a large transaction, a certain number of obligations may need to be fulfilled before a payment is released. For example, testing the quality of the CBD oil so that it meets industry standards prior to purchase. We have handled such escrow arrangements to safely and securely complete the underlying transaction.
A typical escrow arrangement occurs as follows:- Buyer and Seller agree to contractual terms - Either the Buyer or Seller contacts an escrow attorney. Both parties agree to the terms of the legally drafted escrow agreement. Buyer is provided the Escrow Attorney’s banking information. Seller gives the Escrow Attorney its banking information.
- Buyer pays Escrow Attorney - The Buyer submits a payment by approved payment method to our regulated Interest on Lawyers Trust Account (IOLTA). The attorney verifies the payment. Both the Buyer and Seller are notified that funds have been secured in said Trust account.
- A Deposit is paid or the Seller ships merchandise to Buyer - Upon payment verification, the Seller may require an initial deposit or may send the merchandise and submit proof of shipment.
- Buyer and Seller sign a release of funds agreement to Escrow Attorney - The Buyer and Seller sign an agreement allowing for the release of the all or any part of the funds.
- Escrow Attorney pays the Seller - Escrow Attorney releases funds to the Seller from the Trust Account.