Why Businesses Need the Right Escrow Agent—Not a Court Created One

Businesses use escrow services to reduce risk, create certainty, and ensure funds are released only when defined conditions are met. But not all escrow arrangements—and not all court decisions—treat escrow agents the same way. Some recent cases show a divide between courts that expand escrow agents’ duties beyond the contract and courts that correctly recognize that an escrow agent’s role is defined by the escrow agreement itself. For businesses, that distinction matters.

Escrow Services Should Be Predictable

From acquisitions and real estate transactions to complex commercial deals, escrow services are meant to be mechanical and reliable. Businesses do not hire escrow agents to exercise discretion or judgment beyond what the agreement requires. They hire them to:

• Hold funds securely

• Follow written instructions

• Release funds when conditions are met

When courts impose extra, implied duties on escrow agents, businesses face higher costs, increased uncertainty, and greater litigation risk.

When Courts Expand Escrow Agent Duties Beyond the Contract

In Triantafillakis v. Madden (2022), a New York Supreme Court decision treated the escrow agent as a broad fiduciary trustee rather than a neutral contractual stakeholder. The court ordered the escrow agent to deposit funds into court, provide a full accounting, and submit to a deposition—relying on generalized trustee concepts rather than the specific escrow agreement governing the transaction. For businesses, this approach is problematic. It suggests that even when an escrow agent follows the written agreement, the agent may still be exposed to broad obligations not expressly agreed to by the parties. That uncertainty is exactly what businesses use escrow services to avoid.

The Better Rule for Businesses: Contract‑Based Escrow Services

A federal court applying New York law reached a far more business‑friendly and commercially sound conclusion in Mexico Infrastructure Finance, LLC v. Corporation of Hamilton (2020). In Hamilton, the Southern District of New York made clear that:

• An escrow agreement is a contract like any other

• An escrow agent’s fiduciary duties are defined by the escrow agreement

• Courts should not impose obligations beyond the duties the parties actually negotiated

The court expressly rejected the idea that escrow agents owe open‑ended fiduciary duties untethered from the contract. Instead, the agent’s responsibilities rise and fall with the written escrow instructions. This contract‑first approach provides businesses with the predictability they expect when engaging professional escrow services.

Why This Matters to Businesses Using Escrow Services

For companies placing substantial funds into escrow, the difference between these two approaches is significant.

-Expanded Duties Mean Expanded Risk

When escrow agents are treated as general trustees:

• Escrow costs increase, especially if the agreement pays for the escrow agents costs and fees

• Transactions slow down

• Litigation risk rises

• Funds can be tied up unnecessarily

Businesses may face delays and expenses that were never contemplated in the deal.

-Contract‑Defined Duties Mean Certainty

When escrow agents are governed strictly by the escrow agreement:

• Release conditions are clear

• Risk is allocated upfront

• Disputes are easier to resolve

• Transactions move efficiently

The Hamilton decision reinforces that escrow services should operate exactly this way—through clarity, not hindsight.

The Bottom Line for Businesses

Escrow agents exist to provide certainty in complex transactions. Courts that impose broad, implied duties undermine that purpose. The Hamilton case reflects the rule businesses can rely on: A professional escrow agent’s duties should be defined by the escrow agreement—no more and no less. Businesses that choose experienced, contract‑focused escrow services are better protected, better informed, and far less likely to face costly disputes after the deal is done.