What types of contracts does AMLEGALS handle?

AMLEGALS provides comprehensive contract advisory across 43+ contract types including Technology contracts (SaaS, AI/ML, Cloud Services), Data Privacy agreements (DPAs, DPDPA compliance), Commercial contracts (MSAs, Supply, Distribution), IP & Licensing, Employment agreements, and International Trade contracts.

What is the TCL Framework for contracts?

The TCL Framework is AMLEGALS proprietary approach that examines every contract through three lenses: Technical (understanding the operational realities), Commercial (aligning business objectives), and Legal (ensuring compliance and risk mitigation). This integrated approach ensures contracts that work in practice, not just on paper.

Does AMLEGALS handle DPDPA-compliant contracts?

Yes, AMLEGALS specializes in DPDPA-compliant contracts including Data Processing Agreements, Cross-Border Transfer Mechanisms, Data Sharing Agreements, and Consent Management frameworks. Our Vibe Data Privacy™ framework ensures comprehensive compliance with the Digital Personal Data Protection Act, 2023.

Can AMLEGALS help with AI and technology contracts?

Yes, AMLEGALS has dedicated expertise in AI/ML Contracts, AI Governance agreements, AI Training Data Licensing, SaaS Agreements, Cloud Services agreements, and System Integration contracts. We address emerging issues like algorithmic accountability, model ownership, and AI liability allocation.

What makes a good escrow agent?

Effective escrow agents have: financial stability and appropriate insurance, experience with the type of escrow, secure custody capabilities for the assets, neutral position between parties, clear procedures and documentation, and reasonable fee structures. Banks, trust companies, and specialized escrow companies are common choices. Verify the agent's terms, particularly regarding liability limitations and dispute handling.

How should release conditions be drafted?

Release conditions should be: objective (verifiable without subjective judgment), documented (capable of proof through specified evidence), complete (covering all relevant scenarios), and consistent (not conflicting with other agreement terms). Avoid conditions that require the escrow agent to make business or legal judgments - they will refuse or seek instruction from both parties.

What happens when parties dispute release?

Escrow agreements should address disputes. Common mechanisms include: interpleader (agent deposits funds with court for determination), joint instruction requirement (release only with both parties' agreement), arbitration referral, or designation of a deciding party. Without clear procedure, assets may remain frozen while parties litigate, with the agent charging ongoing fees.

What is source code escrow?

Source code escrow protects software licensees by depositing source code with an escrow agent for release if specified trigger events occur (vendor bankruptcy, material breach, discontinuation of support). The software vendor deposits and updates source code; the licensee can access it if triggers occur. Verification that deposited code is current and compilable is important but often overlooked.

Escrow Agreements | Third-Party Holding Arrangements

Overview

Escrow arrangements address a fundamental transaction problem: how can parties who do not fully trust each other exchange value safely? The answer involves a trusted third party - the escrow agent - who holds money, documents, or other assets and releases them only when specified conditions are satisfied. This simple mechanism enables transactions that might otherwise fail due to timing misalignment or trust deficits.

Escrow agreements serve diverse transaction needs. In M&A transactions, portions of purchase price may be escrowed to secure indemnification obligations. In software licensing, source code escrow protects licensees if the vendor fails. In real estate, escrow holds earnest money pending closing conditions. In construction, retention escrows secure performance obligations. Each context has specific requirements, but all share the basic structure of conditional holding and release.

The escrow agent occupies a peculiar position - engaged by the parties but owing duties to each that may conflict when disputes arise. The escrow agreement must clearly define the agent's role, the conditions for release, and what happens when parties disagree. Ambiguity in these provisions creates problems precisely when they matter most - during disputes about release.

Key Considerations

1

Escrowed Assets

What is being held - funds, securities, documents, software, or other assets - and custody requirements.

2

Release Conditions

The specific, verifiable conditions that trigger release and the evidence required to demonstrate satisfaction.

3

Agent Duties

The escrow agent's obligations, limitations, and protections - they will insist on limited duties and indemnification.

4

Dispute Procedures

What happens when parties disagree about release - typically interpleader or agreed resolution mechanism.

5

Duration and Termination

How long the escrow continues and what happens to escrowed assets at expiration.

6

Fees and Costs

Escrow agent fees, interest on escrowed funds, and cost allocation between parties.

Applying the TCL Framework

Technical

Understanding the underlying transaction and escrow purpose
Assessing verification mechanisms for release conditions
Evaluating custody and security requirements
Reviewing technology escrow specific requirements
Understanding asset valuation and accounting

Commercial

Sizing escrow relative to underlying risk
Negotiating release triggers and timing
Structuring partial release mechanisms
Addressing interest and investment of escrowed funds
Managing escrow costs allocation

Legal

Drafting clear and objective release conditions
Creating workable dispute resolution procedures
Balancing agent protections with party interests
Addressing tax treatment of escrowed amounts
Ensuring enforceability across jurisdictions

“

"The escrow agreement is only as good as its release conditions. Vague conditions create disputes; clear conditions enable smooth release. The time to negotiate precision is at drafting, not when parties are already disagreeing about whether conditions are met."

AM

Anandaday Misshra

Founder & Managing Partner

Common Pitfalls

Ambiguous Release Conditions

Conditions that cannot be objectively verified, creating disputes when release is sought.

Agent Overreliance

Expecting escrow agents to make subjective determinations they are unwilling to make.

Dispute Paralysis

No clear mechanism for resolving disputes, leaving assets frozen indefinitely.

Duration Gaps

Escrow expiration before underlying obligations mature, leaving parties exposed.

Inadequate Agent Diligence

Not verifying escrow agent capability, financial stability, and insurance.

Legal Framework

Escrow arrangements in India are governed by general contract law and, depending on the escrowed assets, specific regulations. RBI regulations affect escrow accounts held by banks. SEBI regulations apply to certain securities escrows. Real estate escrows may be affected by RERA provisions. Foreign exchange regulations apply when escrows involve cross-border transactions. The escrow agent may have regulatory obligations depending on its nature and the assets held.

Practical Guidance

Draft release conditions that are objective and verifiable.
Select an escrow agent with appropriate capability and financial stability.
Include clear dispute resolution procedures, not just interpleader.
Address what happens to interest or income on escrowed assets.
Ensure escrow duration matches the underlying obligations.
Review escrow agent standard terms carefully - they heavily favor the agent.

Frequently Asked Questions

Related Contract Types

Master Service Agreements

Commercial & Corporate

Framework contracts enabling multiple engagements under consistent terms

Software Licensing Agreements

Intellectual Property

End-user, enterprise, and OEM licenses with deployment and modification rights

Share Purchase Agreements

Financial & Investment

Share transfers with comprehensive protections for buyers and sellers

Loan & Facility Agreements