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An Escrow Agreement is a legal contract where a trusted third party (the escrow agent) holds money, property, or documents until specific conditions are met. In Nigeria, banks, law firms, and licensed financial institutions commonly serve as escrow agents, especially for high-value real estate and international trade deals.

The agreement protects all parties by clearly spelling out how and when the escrow agent should release the assets. For example, when buying property in Lagos, the buyer's payment stays in escrow until the seller provides proof of clear title and completes the property transfer. Under Nigerian law, escrow agents must follow strict rules about handling client funds and maintaining detailed records.

Use an Escrow Agreement when completing high-value transactions where trust between parties needs extra protection. This is especially vital in Nigerian real estate deals, international trade contracts, and major business acquisitions where significant funds or assets change hands.

The agreement becomes essential when dealing with new business partners, handling large deposits, or managing transactions that take time to complete. For example, construction projects in Nigeria often use escrow to protect milestone payments, while tech companies use it when selling intellectual property. It's particularly important when dealing with overseas parties or when Nigerian banking regulations require additional safeguards for large transfers.

• Real Estate Escrow: Most common in Nigerian property transactions, holding both purchase funds and property documents until closing conditions are met
• Trade Finance Escrow: Used in import/export deals, protecting both buyer and seller during international transactions through Nigerian banks
• Construction Escrow: Holds project funds and releases them in stages as construction milestones are achieved
• Digital Asset Escrow: Emerging type for software and technology deals, securing payment until delivery and testing are complete
• Corporate Transaction Escrow: Used in mergers and acquisitions, holding funds until due diligence requirements are satisfied

• Licensed Escrow Agents: Nigerian banks, law firms, or financial institutions authorized by regulators to hold and manage escrow funds
• Buyers: Deposit funds into escrow accounts and agree to release conditions, common in property or business acquisitions
• Sellers: Provide assets or documents while awaiting secure payment through the escrow arrangement
• Legal Counsel: Draft and review Escrow Agreements to ensure compliance with Nigerian banking and commercial laws
• Corporate Finance Officers: Manage escrow arrangements for their organizations during major transactions

• Party Details: Gather complete legal names, addresses, and registration numbers of all parties, including the chosen escrow agent
• Asset Description: Document precise details of money, property, or items being held in escrow
• Release Conditions: Define clear, measurable conditions that trigger the release of escrow assets
• Timeline: Set specific dates for deposits, milestones, and final completion
• Payment Terms: Detail escrow agent fees, transaction costs, and handling of interest earned
• Regulatory Compliance: Confirm the chosen escrow agent meets Nigerian banking regulations

• Identification Section: Full legal names and details of all parties, including the escrow agent's license number
• Asset Description: Detailed specification of escrow property, including value and condition
• Release Terms: Clear conditions for disbursement of escrow assets under Nigerian contract law
• Duties and Rights: Specific obligations of each party and the escrow agent's responsibilities
• Fee Structure: Breakdown of escrow agent fees and transaction costs
• Dispute Resolution: Clear process for handling conflicts under Nigerian jurisdiction
• Termination Clause: Conditions for ending the agreement and handling remaining assets

An Escrow Agreement differs significantly from an Asset Purchase Agreement in both purpose and structure, though they often work together in Nigerian business transactions. While both documents play crucial roles in major transactions, they serve distinct functions.

• Primary Function: Escrow Agreements focus on protecting funds or assets through a trusted third party, while Asset Purchase Agreements detail the actual transfer of ownership and terms of sale
• Timeline: Escrow Agreements typically remain active until specific conditions are met, whereas Asset Purchase Agreements conclude once the sale is complete
• Parties Involved: Escrow Agreements require a neutral third-party agent, while Asset Purchase Agreements only involve buyer and seller
• Legal Protection: Escrow Agreements provide transaction security through fund holding, while Asset Purchase Agreements focus on warranties, representations, and transfer terms