When drafting, reviewing or negotiating an escrow agreement (also known as an escrow deed) in the context of a construction project, the following should be taken into account:

1. •

   What is the purpose of an escrow agreement?

   An escrow agreement sets out the desire of the parties to set up and operate an escrow account where money will be placed as security for payments which are to be made under an underlying contract and released when defined conditions are satisfied.

2. •

   Who should be party to an escrow agreement?

   The escrow agreement is entered into between:

   1. ◦

      the party who is obliged to make payments to another party under another contract eg the employer under the building contract or the contractor under a sub-contract (the Payer)

   2. ◦

      the party who is entitled to receive payments from another party under another contract eg the contractor under the building contract or the sub-contractor under a sub-contract (the Payee)

   3. ◦

      an escrow agent who will act independently and operate the escrow account in accordance with the terms of the escrow agreement (included