A portion of the price is held by an escrow agent for a defined period, typically matching the general survival period, and released as claims are resolved. It provides a funded source for indemnification.

Escrow is frequently the exclusive remedy.

Alternative Names:

Indemnity Escrow|Holdback

Why it Matters?

Whether escrow is the exclusive remedy or merely a security determines the seller's actual exposure, since an exclusive escrow caps recovery at the held amount regardless of the stated indemnification cap. Buyers negotiating a cap above the escrow without recourse beyond it have secured a number without a source. Release mechanics and dispute procedures also matter, since a disputed claim can tie up the entire escrow past the release date.

Frequently asked questions

Is escrow the exclusive remedy?

Is escrow the exclusive remedy?

It depends on the agreement, and an exclusive escrow caps actual recovery at the held amount regardless of the stated cap.

What complicates release?

What complicates release?

A disputed claim can tie up the entire escrow past the scheduled release date depending on the dispute procedures.