In any attorney escrow or paymaster arrangement, the release condition answers a simple question: what exactly must happen before the money is paid? Getting this right is the single most useful thing the parties can do to avoid delay and disputes.
Make it objective
A good condition can be checked by someone who knows nothing about the deal. "When the buyer is satisfied with the goods" is subjective. "On receipt of an inspection certificate from [named inspection company] showing [specification]" is objective.
Name the document and who issues it
Say which document is required, who must issue it, and how it will be received. Examples:
- a bill of lading for the named vessel and cargo;
- a quality and quantity certificate from a named independent inspector;
- an assay report from a named refinery;
- a recorded deed or a filed corporate document;
- a written release signed by both buyer and seller.
Where possible, the document should come directly from the issuer, or be one that the attorney can confirm with the issuer.
Set a deadline
State the date by which the condition must be met, and what happens if it is not: usually return of funds to the sending account. See what happens if a deal falls apart.
Plan for partial performance
If goods ship in lots, or the price may change with final weight or quality, say how partial releases and adjustments work. A simple table of events and amounts avoids confusion.
List the payees and amounts
Release conditions work together with irrevocable payment instructions, which list each payee, the amount or percentage, and their bank details in their own name. Bank details should be confirmed by telephone before the first payment. Our commission disbursement article explains the process.
Plan for disagreement
Include what happens if the parties dispute whether the condition was met: for example, holding the disputed amount until joint written instructions or a court order.
Avoid these phrases
- "Upon successful completion" (of what, judged by whom?).
- "Upon presentation of standard documents" (which ones?).
- "As soon as possible" (by what date?).
Need help?
The attorney prepares the agreement with the client and can suggest clear conditions for the type of transaction. Contact the office to discuss your deal.