What is an escrow?
May 05, 2008 in What
Indian business community practices a business transaction called ‘Documents against delivery’.
A manufacturer will order spare parts or raw material from another manufacturer. The price would have been negotiated before ordering but the payment would not have been made by the purchaser.
He would have entered into an agreement with the seller that he will pay the invoice amount
to the seller’s bank and the bank can release the freight documents after the payment has been received.
This is called ‘escrow’ now. As per Webster dictionary, an escrow is a deed, a bond, money, or a piece of property held in trust by a third party to be turned over to the grantee only upon fulfillment of a condition.
Am I clear?
Image taken from Google Images.