Escrow Sale of Goods Agreement with Inspection and Payment Terms

This Escrow Sale of Goods Agreement with Inspection and Payment Terms is designed to be used in connection with a sale of goods.

The data protection provisions in this document have been reviewed and updated for Brexit. References to data protection legislation have been updated with reference to the UK GDPR.

The buyer and seller may decide to appoint an escrow agent where they wish to reduce the risk that arises because they do not know each other well (or at all) and consequently are not able to trust each other. The risk for the seller is that he may not be able to recover the price to be paid by the buyer for the goods, and the risk for the buyer is that if the seller were to receive payment on delivery, before the buyer has an opportunity to check that the goods conform to certain warranty or other requirements in the sale contract, the buyer might not practicably be able to obtain a remedy if the goods do not conform to the sale contract.

Appointment of an escrow agent as an intermediary of the buyer and seller under this template helps to minimise the risk for the seller in that he only has to deliver the goods after he knows that the buyer has paid over the purchase money to the escrow agent, and helps to minimise the risk for the buyer in that the escrow agent only releases the price to the seller after the buyer has received delivery and has had a short period (e.g. 7 days, or 30 days where the buyer is a consumer) to inspect the goods to ensure that they do conform to the warranty in the sale contract.

If in that period the buyer finds that the goods do not conform to the contract, the price is returned to the buyer by the escrow agent, and the goods are returned to the seller. If the goods do conform, the escrow agent releases the purchase price to the seller.

This agreement also includes optional provisions in square brackets and marked with asterisks for inclusion where the buyer not only wishes to inspect the goods before payment is released, but also considers that there is a risk that the seller may for whatever reason fail to deliver the goods at all despite the buyer paying for the goods. To cover that case, all of the asterisked text in square brackets should be included.

However, the buyer might not wish just to have a short period after delivery in which to check that the goods conform to the warranty. He might instead require the goods to conform to a warranty for a substantial period (e.g. 90 days) before the seller receives payment (and then reject the goods if they do not conform and recover the purchase price). Alternatively, he might only be concerned that the seller might not deliver the goods at all. In either of those cases, one of the other sale of goods escrow agreement templates in this subfolder should be used instead of this template. The Escrow Sale of Goods Agreement with Delivery and Payment Terms template in this subfolder requires the escrow agent not to release payment to the seller until the goods are delivered to the buyer. The Escrow Sale of Goods Agreement with Warranty and Payment Terms template requires the escrow agent not to release payment to the seller unless the goods conform to the warranty in the sale contract for a stated period (e.g. 90 days) and it also includes optional wording which may be included to cover the risk that the seller does not deliver the goods at all.

The escrow agent is an independent entity trusted by both seller and buyer and is appointed by them under this template as the agent of both of them. The agent may charge fees and/or expenses at a commercial rate, or may instead accept a small or no fee. Our template assumes that at least some fee will be charged.

The agent may be any of the following:

- an individual

- two or more individuals acting jointly

- a company, firm, or institution which routinely provides escrow services in connection with sales of goods

- a professional firm (or two firms acting jointly), for example, a firm of accountants or solicitors), which agrees to provide an escrow service to professional clients

- an institution (e.g. bank) which is prepared to act as escrow agent on a one-off basis.

This Escrow Sale of Goods Agreement with Inspection and Payment Terms template may be used with a contract for sale of new or second hand goods of any description. It is not specifically designed for any particular type of goods but, for example, it might typically be used for sale of a second hand vehicle. Since the template is designed for goods of relatively high value, e.g. several thousand pounds or more, we have included terms to cover all of the most important issues which might arise. For lower value goods, or where any or all of the three parties require a much simpler document, a shorter agreement may be used but care should be taken before deleting any provisions from this template.

This document is suitable for a sale in any of the following cases:

- the seller is a private individual selling to a consumer/private individual (i.e. neither of them are dealers or act in the course of any business)

- both are in business

- the seller is in business and the buyer is a consumer/private individual

- the seller is a consumer/private individual and the buyer is in business.

Note that paragraph “B” of the template anticipates that the sale contract will be drafted to state that it does not require the seller and buyer to enter into any escrow agreement but that if they do not do so within a stated time, the sale contract will not have any legal effect (i.e. there is no sale).

This template is only suitable for use where all three parties are based and operate in the UK, and payment and delivery of goods are to be in the UK.

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