Escrow Agreement
The legal term, known as the Escrow Agreement, first appeared on the territory of the United States. Escrow Agreement, which started to exist in the American legal system during the abundance period in California in the second half of the 19th century, aims to eliminate the distrust between the parties.
The primary purpose of a contract signed between the parties is that both parties fulfill their obligations. Escrow Agreement also aims to protect the rights of both parties if these obligations are not fulfilled. In the contracts, one of the parties guarantee to perform any work under the terms of the contract. The other party pays for the work that has been done. Both sides of this bilateral relationship carry risks within themselves. Escrow Agreement comes into play at this stage.
What is an Escrow Agreement?
As Escrow is not a legal term often encountered in Turkey, the question of What is an Escrow Agreement can also blur some minds. When explaining Escrow, it is primarily necessary to mention the area in which it is useful. Having a reliable 3rd person among the parties in transactions such as contractual debt and assigment of share helps the process to work faster and safer.
As the agreed stages of the work come to an end, the Escrow Aggrement is drawn up so that payments can be made regularly during the agreed periods. In this contract, an independent third person is determined, which both parties sign under. The assets transferred to the account of this determined third person are delivered to the buyer at specified times. Briefly, the third person determined in the Escrow Aggrement is obliged to protect the assets for a certain period of time so that no damage is caused to either parties at the end of the agreement.
Also: Promise to sell agreement
Escrow Agreements and Its Place in Turkish Law
The exact equivalent of the Escrow Agreement, which is frequently used in American Law, is not included in the Turkish Legal system. As stated in Law of Obligations, the parties are under freedom of contract – under certain conditions – to sign a contract whichever way they please in Turkey. However, there are some cases in which becoming a party as “independent 3rd party” like Escrow occur in Turkey. Some of these caes are discussed in detail in Law of Obligations. The concept of Receivership, which is similar to the Escrow Agerement on many issues, is one of them.
The “depositum” requirement in the Escrow Agreement is applied in a way different from others in Turkey. In cases known as “Contract of Mandate”, the person who preserves the assets delivers them upon request. There is no such situation in the Escrow Agreement. In contracts such as Receivership, the situation between the parties in the contract should be contentious or uncertain. As in Contract of Mandate , Escrow Agreement is also legally differentiated from the case of receivership.
In areas where contracts are frequently made, such as construction and sales, Escrow Agreements can play a significant role in resolving many problems. However, generally in Turkey, where the legal system of the European continent is applied, no current application is performed in this regard. You may contact us in case you need an independent 3rd person such as in Escrow Agreement for contracts such as construction, sales, attorneys retainer.
