ESCROW
Escrow is a legal concept describing a financial agreement whereby an asset or money is held by a third party on behalf of two other parties that are in the process of completing a transaction.
Simply put, an escrow is a transaction in which one person in a contract with another delivers a written document, money, evidence of title to real or personal property, or other things of value to a third person to be held by such person until the happening of a certain condition. The term generally is used to refer to the state or condition, though it properly refers only to a written instrument of instructions.
The third-party with whom the property is kept in trust is known as an escrow agent or a depositary. The principal parties are the grantee and the grantor. The property given in trust for deposit is known as escrow property and the directions given to the person who accepts delivery of the document are called the escrow agreement.
The escrow agreement is a contract. 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.
The transaction in which an escrow is created can be sale, transfer, encumbering, or leasing of real or personal property to another person. Escrow is a financial process used when two parties take part in a transaction and there is uncertainty about the fulfillment of their obligations. Escrow accounts serves to assure that the buyer has sufficient funds to complete the purchase transaction.
Situations that may use escrow can involve internet transactions, banking, intellectual property, real estate, mergers and acquisitions, law, and more.
Consider a company that is selling goods internationally. That company requires assurance that it will receive payment when the goods reach their destination. The buyer, for their part, is prepared to pay for the goods only if they arrive in good condition.
The buyer can place the funds in escrow with an agent with instructions to disburse them to the seller once the goods arrive in a suitable state. This way, both parties are protected and the transaction can proceed.
It can also be used in family transactions, in which, upon the occurrence of a condition, such as the death of a family member, certain written instruments will be delivered by the third party to another family member. Also, in Real estate transactions between the buyer and the seller of a house. The money for the payment of the house is held in escrow by the escrow agent. Among others, using the escrow allows the seller to conduct the inspections required by the buyer.
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 is liable to the depositor. This could be a real estate deal, a business partnership, or even an online transaction. The terms are agreed on beforehand between both parties and then escrow holds onto the funds until they have fulfilled their part of the deal.
See Federal Republic of Nigeria -v- JP Morgan Chase Bank, Brossette Manufacturing (Nig) Ltd v Ola Ilemobola Ltd & Ors, Awojugbagbe Light Industries Ltd v P.N. Chinukwe & Anr.
Nigerian banks such as First Bank, FCMB and others offer Escrow services. There are also companies that specifically offer Escrow services in Nigeria; Vesicash, PayScrow, EscrowLock, and others.
The use of escrow accounts can occur in any type of financial transaction. Escrow services provide a way to protect both sides of a deal.
FROM THE DIRECTORATE OF RESEARCH
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