What is escrow?
Escrow is an arrangement where money, shares, documents or code are held by a neutral third party and released only when agreed conditions are met. It solves the sequencing problem in transactions: neither side has to trust the other to perform first, because performance runs through the agent.
Where escrow is used
In M&A, part of the purchase price sits in escrow to secure warranty and indemnity claims, typically alongside or instead of a direct holdback. In venture rounds, escrow can bridge signing and closing conditions. In commercial contexts, software source code escrow protects customers against vendor failure, and real-estate and cross-border trade escrows manage delivery-against-payment. Crypto markets rebuilt the same function with multisig wallets and smart contract escrows, where the release condition is code rather than an agent’s judgment.
The escrow agreement, and Turkish practice
The escrow agreement is a three-party contract and its quality decides everything: precise release conditions and required evidence, the objection and dispute procedure, what the agent does when instructions conflict (usually deposit with a court or hold until joint instruction), fees, interest and tax on the escrowed amount. In Türkiye, escrow services are provided by banks within their custody business; there is no standalone escrow-agent licence regime, so the contractual framework and the agent’s institutional quality carry the load. In cross-border deals the escrow typically follows the SPA’s governing law with an international bank or agent, and Turkish enforcement questions are handled at the drafting stage.
What makes a release condition well drafted?
It is objectively verifiable by the agent from defined documents: a closing certificate, a court decision, a joint written instruction. Conditions that require the agent to judge whether a warranty was breached create deadlock by design.
Who gets the interest on escrowed money?
Whatever the agreement says; silence produces disputes. Market practice credits interest to the party that ultimately receives the principal, with the agent’s fees carved out first.
Is smart contract escrow legally an escrow?
Functionally yes, legally it is a contract like any other; the difference is that release runs on code. The drafting focus shifts to what happens when the code and the parties’ intent diverge, which is exactly when you discover whether there is a fallback governed by ordinary contract law.
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