Types of Escrow Agreements

 

There are several types of escrow agreements that are commonly used for the protection of software source-code:

  • Two-party escrow agreement
  • Multiple beneficiary two-party escrow agreement
  • Three-party escrow agreement
  • Multiple beneficiary three-party escrow agreement

GITC Escrow Deed

If you are servicing the Australian government (federal, state or local) then you may be asked to consider the GITC Escrow Deed as the escrow agreement template. The GITC Escrow Deed is a Schedule of the Government Information Technology Contract (GITC) pro forma.  This is essentially a three-party escrow agreement.

Three-party software escrow agreement

A Three-party software escrow agreement is the most common escrow agreement format. It exists between 1) a software developer, 2) a software end-user and 3) Harbinger – the escrow agent. Often the software end-user will require a Three-party escrow agreement to meet their procurement guidelines, or to reduce the risk to their business of using the software.

The source code that is deposited into escrow is delivered to the end-user if certain conditions stipulated in the agreement are met (like insolvency, failure to meet an agreed service level, or even death of an important person in the vendor’s team).

As a software end-user, you should always implement a Three-party escrow agreement if:

  • you are making a relatively large investment in the software
  • the software has been tailored to your requirements
  • there is intellectual property within the source code that you could not easily replicate
  • the software is important or critical to your business