ESCROW
Something of value, such as a deed, stock, money, or written instrument, that is put into the custody of a third person by its owner, a grantor, an obligor, or a promisor, to be retained until the occurrence of a contingency or performance of a condition.
An escrow also refers to a writing deposited
with someone until the performance of an act or
the occurrence of an event specified in that writ-
ing. The directions given to the person who
accepts delivery of the document are called the
escrow agreement and are binding between the
person who promises and the person to whom
the promise is made. The writing is held in
escrow by a third person until the purpose of the
underlying agreement is accomplished. When
the condition specified in the escrow agreement
is performed, the individual holding the writing
gives it over to the party entitled to receive it.
This is known as the second delivery.
Any written document that is executed in
accordance with all requisite legal formalities
may properly be deposited in escrow. Docu-
ments that can be put in escrow include a deed,
a mortgage, a promise to pay money, a bond, a
check, a license, a patent, or a contract for the
sale of real property. The term escrow initially
applied solely to the deposit of a formal instru-
ment or document; however, it is popularly used
to describe a deposit of money.
The escrow agreement is a contract. The par-
ties to such an agreement determine when the
agreement should be released prior to making
the deposit.After the escrow agreement has been
entered, the terms for holding and releasing the
document or money cannot be altered in the
absence of an agreement by all the parties.
A depositary is not a party to the escrow
agreement, but rather a custodian of the deposit
who has no right to alter the terms of the agree-
ment or prevent the parties from altering them
if they so agree. The only agreement that the
depositary must make is to hold the deposit,
subject to the terms and conditions of the agree-
ment. Ordinarily, the depositary has no involve-
ment with the underlying agreement; however,
an interested party may, in a few states, be
selected to be a depositary if all parties are in
agreement. In all cases, a depositary is bound by
the duty to act according to the trust placed in
him or her. If the depositary makes a delivery to
the wrong person or at the wrong time, he or she
