Escrow agreements
Contract Law

Escrow agreements are geared to protect the licensee paying a computer software developer to design and construct software that meets their particular needs.

These agreements are relied upon when a software house loses the means to continue to support the software whether through liquidation or lack of will. Escrow contracts are premised on the state of affairs that the licensee is never in possession of the source code, and to that extent, the licensee is exposed to the risk that if the software developer or software house fails, they have recourse to the source to maintain and develop that source code.

The conditions for release of the computer software to the licensee may be made as particular as the parties wish to make them. The more formal flavour of escrow agreements involves an independent trusted third party who specialise in providing escrow services. They take possession of the source code for the software, and undertake by contract to release the source code to the licensee only in the specified circumstances. The licensee gains some comfort in managing their risk in investing in the software development in the first instance.