Why Businesses Should Choose a Professional Escrow Agent: The Risk of Ambiguous Instructions

When businesses use escrow services, they are placing significant trust—and often substantial funds—in an escrow agent’s hands. The expectation is simple: escrow funds will not be released unless the conditions in the escrow agreement are met. A recent federal court decision underscores why choosing the right escrow agent—and the right escrow agreement—matters more than many businesses realize.

Escrow Services Are About More Than Holding Funds

Escrow agents do more than safeguard money. They manage risk. That risk increases dramatically when escrow instructions are unclear or poorly drafted. In Mexico Infrastructure Finance, LLC v. Corporation of Hamilton (SDNY 2019), a dispute arose over the release of more than $13 million in escrow funds. The escrow agreement required a “joint written notice” before funds could be released. However, the agreement never clarified what “joint” meant. Instead of one unified notice, the escrow agent received two separate notices from different parties and released the funds. The funds were then misused, and the transaction collapsed—leading to extensive litigation and claims against the escrow agent. The court ruled that because “joint” was undefined, the escrow agent faced potential liability for releasing funds without clearly established authorization.

What This Means for Businesses Using Escrow Services

For businesses, this case highlights a critical point: Ambiguity in escrow instructions creates risk—for everyone involved. When escrow terms are unclear, disputes can arise even when all parties believe they are acting properly. That risk can delay transactions, expose funds to misuse, and lead to costly legal battles. The right escrow agent helps prevent these problems before they occur.

Choosing the Right Escrow Agent

Businesses seeking escrow services should ask the right questions upfront:

• How does the escrow agent handle ambiguous instructions?

• Will the agent require written clarification before releasing funds?

• Does the agent have legal and fiduciary experience?

• Is the agent prepared to manage high‑value transactions responsibly?

Escrow services are not commoditized. Experience, judgment, and attention to detail matter—especially when the transaction involves significant sums or multiple parties. If your business needs escrow services, choose an escrow agent who treats precision as essential.