Software escrow agreements are an agreement between a seller and a purchaser that transfers the purchaser’s sole ownership in a piece of software to a third party. The purpose is to protect the purchaser against any future disagreements with the seller, such as claims of software defects or infringement. In this article, we’ll cover what software escrow agreements are and why you might want one. 

What is an Escrow Agreement? 

An Escrow Agreement is a contract between two parties, whereby one party (the “Escrow Agent”) holds assets or property in trust for the benefit of another party (the “Beneficiary”). The Escrow Agent may be a financial institution, lawyer, or other third party. 

The purpose of an Escrow Agreement is to provide security and peace of mind to the Beneficiary by ensuring that the assets or property held in trust are protected and will be delivered as agreed. It also allows the Beneficiary to have confidence that the terms of the agreement will be carried out even if the other party fails to live up to their obligations. 


Under an Escrow Agreement, the Escrow Agent agrees to hold, manage, and safeguard the assets or property in accordance with the terms and conditions set forth in the agreement. They also agree to distribute these assets or property as directed by the Beneficiary. 

The Escrow Agent is typically compensated for their services with a fee paid by both parties.