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What should be included in an Escrow Agreement?
Introduction
An escrow agreement is a legal document that outlines the terms and conditions between parties involved in a transaction, where a third party (the escrow agent) temporarily holds assets or documents until certain conditions are met. In Kenya, the principles governing escrow agreements are derived from contract law, as well as specific provisions in various statutes. This response will outline the essential elements that should be included in an escrow agreement, referencing relevant Kenyan laws and regulations.
Table of Contents
Parties Involved
Description of the Escrow Property
Conditions for Release
Duties and Responsibilities of the Escrow Agent
Duration of the Escrow
Fees and Costs
Dispute Resolution
Governing Law
Termination of the Agreement
Miscellaneous Provisions
1. Parties Involved
Sources:
Law of Contract Act (Cap 23)
Common Law Principles
An escrow agreement must clearly identify all parties involved:
Depositor: The party placing the asset or document into escrow.
Beneficiary: The party who will receive the asset or document upon fulfillment of the conditions.
Escrow Agent: The neutral third party responsible for holding and releasing the asset or document.
2. Description of the Escrow Property
Sources:
Law of Contract Act (Cap 23)
Common Law Principles
The agreement should provide a detailed description of the property or asset being held in escrow. This includes:
Type of Asset: Whether it is money, documents, property titles, etc.
Identification Details: Serial numbers, account numbers, or any other identifying information.
Value: The monetary value of the asset, if applicable.
3. Conditions for Release
Sources:
Law of Contract Act (Cap 23)
Common Law Principles
The conditions under which the escrow agent will release the asset or document must be explicitly stated. These conditions may include:
Completion of a Transaction: Such as the sale of property or completion of a service.
Fulfillment of Obligations: Such as meeting certain performance criteria.
Time-Based Conditions: Release after a certain period.
4. Duties and Responsibilities of the Escrow Agent
Sources:
Law of Contract Act (Cap 23)
Common Law Principles
The agreement should outline the specific duties and responsibilities of the escrow agent, including:
Safekeeping: Ensuring the asset or document is securely held.
Notification: Informing parties of the status of the escrow.
Compliance: Adhering to the terms and conditions of the agreement.
5. Duration of the Escrow
Sources:
Law of Contract Act (Cap 23)
Common Law Principles
The agreement should specify the duration for which the escrow will be in effect. This includes:
Start Date: When the escrow begins.
End Date: When the escrow is expected to end, or conditions under which it will terminate.
6. Fees and Costs
Sources:
Law of Contract Act (Cap 23)
Common Law Principles
The agreement should detail any fees or costs associated with the escrow, including:
Escrow Agent Fees: Payment terms for the escrow agent.
Other Costs: Any additional costs that may arise during the escrow period.
7. Dispute Resolution
Sources:
Arbitration Act (Cap 49)
Law of Contract Act (Cap 23)
The agreement should include a clause on how disputes will be resolved, specifying:
Arbitration: Whether disputes will be resolved through arbitration.
Jurisdiction: Which court or legal body will have jurisdiction over disputes.
Mediation: Whether mediation will be attempted before arbitration or litigation.
8. Governing Law
Sources:
Law of Contract Act (Cap 23)
Common Law Principles
The agreement should state the governing law that will apply to the escrow agreement. In Kenya, this would typically be:
Kenyan Law: The agreement should specify that it is governed by the laws of Kenya.
9. Termination of the Agreement
Sources:
Law of Contract Act (Cap 23)
Common Law Principles
The agreement should outline the conditions under which it can be terminated, including:
Mutual Agreement: Termination by mutual consent of all parties.
Fulfillment of Conditions: Automatic termination upon fulfillment of the escrow conditions.
Breach: Termination due to breach of the agreement by any party.
10. Miscellaneous Provisions
Sources:
Law of Contract Act (Cap 23)
Common Law Principles
The agreement may also include various miscellaneous provisions, such as:
Amendments: How the agreement can be amended.
Notices: How notices should be communicated between parties.
Severability: A clause stating that if one part of the agreement is invalid, the rest remains in effect.
Conclusion
An escrow agreement is a crucial document in many transactions, providing a neutral mechanism to ensure that conditions are met before assets or documents are transferred. In Kenya, the essential elements of an escrow agreement are governed by the Law of Contract Act and common law principles. By including detailed provisions on the parties involved, description of the escrow property, conditions for release, duties of the escrow agent, duration, fees, dispute resolution, governing law, termination, and miscellaneous provisions, parties can ensure a clear and enforceable agreement.
Answered by mwakili.com