When the closing conditions are not fully met at the closing of a transaction to sell a business, an escrow agreement is the instrument by which the vendor and the purchaser give a third party (escrow agent) temporary custody of all the signed original documents of the transaction as well as all or part of the sale price. The escrow agent will maintain custody thereof until all the closing conditions are met or until the transaction is cancelled as a result of certain conditions not being met by the agreed deadline.

It is important to pay a particular attention to the provisions of Civil Code of Quebec concerning mandates, service agreements and the administration of the property of others, which could affect the interpretation of certain clauses in this template.

We recommend using this escrow agreement template in connection with a business sale transaction where any closing condition(s) have not been fully met by the closing date. In such a case, in order to maintain the momentum of the transaction and to adequately protect the parties against the non-fulfillment of any conditions, best practice requires entrusting all signed original documents and all or part of the sale price to a third party (escrow agent).

The escrow agent, who may also be a lawyer, will maintain all items in its care until all the conditions are fully met or the transaction is cancelled as a result of any condition(s) not being met by the agreed deadline.

0.00 INTERPRETATION
0.01 Definitions
0.01.01 Activities
0.01.02 Agreement
0.01.03 Breach
0.01.04 Closing Conditions
0.01.05 Closing Date
0.01.06 Closing Documents
0.01.07 Confidential Information
0.01.08 Deadline
0.01.09 Event of Default
0.01.10 Force Majeure
0.01.11 Full Completion
0.01.12 Intellectual Property
0.01.13 Law
0.01.14 Legal Representatives
0.01.15 Ordinary Course of Business
0.01.16 PARTY
0.01.17 Person
0.01.18 Primary Agreement
0.01.19 Prime Rate
0.01.20 PRINCIPALS’ Property
0.01.21 Sale Price [OR Portion of the Sale Price]
0.01.22 Transitional Period
0.02 Entire Agreement
0.03 Applicable Laws
0.04 Non-Compliance
0.04.01 Severability
0.04.02 Substitute Provision
0.05 Miscellaneous
0.05.01 Cumulative Rights
0.05.02 No Waiver
0.05.03 Time and Days
a) Time of the Essence
b) Computation of Time
c) Delays
0.05.04 Financial References
0.05.05 Cross-References
0.05.06 Gender and Number
0.05.07 Headings
0.05.08 Presumptions
0.05.09 Knowledge
0.05.10 Approval
1.00 PURPOSE
1.01 Appointment and Removal
1.01.01 Initial Appointment
1.01.02 Removal
1.01.03 New Appointment
1.01.04 Delivery
1.01.05 Liability
1.02 Creating Escrow Arrangement
2.00 CONSIDERATION
2.01 Lump Sum Fee
2.01.01 Amount
2.01.02 Indexation
2.02 Additional Fees
2.03 Disbursements
3.00 TERMS OF PAYMENT
3.01 Fees and Disbursements
3.02 Interest
3.03 Loss of Term
3.04 Reimbursement of Legal Costs
4.00 SECURITY
4.01 In Favour of PRINCIPALS
4.02 In Favour of ESCROW AGENT
5.00 MUTUAL REPRESENTATIONS AND WARRANTIES
5.01 Authority
5.02 Binding Agreement
5.03 Informed Consent
6.00 REPRESENTATIONS AND WARRANTIES OF VENDOR
7.00 REPRESENTATIONS AND WARRANTIES OF PURCHASER
8.00 REPRESENTATIONS AND WARRANTIES OF ESCROW AGENT
9.00 MUTUAL DUTIES AND OBLIGATIONS
9.01 Representations and Warranties
9.02 Confidential Information
10.00 DUTIES AND OBLIGATIONS OF PRINCIPALS
10.01 Signature
10.02 Transitional Period
10.03 Authorization to Release
10.03.01 Joint Authorization
10.03.02 Sworn Declaration
a) Transmit
b) Service
10.04 Fees and Disbursements
10.05 Destruction
10.06 Release and Discharge
11.00 DUTIES AND OBLIGATIONS OF ESCROW AGENT
11.01 Mandate
11.02 Custody of Closing Documents
11.02.01 Possession
11.02.02 Access
11.03 Custody of Money
11.04 Release of Custody
11.04.01 Full Completion
a) Joint Authorization
b) Procedure
11.04.02 Event of Default
a) Joint Authorization
b) Procedure
11.05 No Authorization
11.05.01 Sworn Declaration
a) Transmit
b) Service
11.05.02 No Opposition
11.05.03 Opposition
11.06 Dispute
11.07 Liability
11.07.01 Acts, Errors or Omissions
11.07.02 Non-Liability
11.07.03 Legal Proceedings
11.07.04 Litigation
11.08 Resignation
12.00 OTHER PROVISIONS
12.01 Assignment
12.01.01 Prohibition
12.01.02 Exception
12.02 Force Majeure
12.02.01 No Default
12.02.02 Duty
12.02.03 Rights of Other PARTY
12.03 Further Assurances
12.04 Notice
12.05 Dispute Resolution
12.05.01 Good Faith Negotiations
12.05.02 Mediation
a) Process
b) Mediator
c) Settlement
d) Legal Proceedings [OR Arbitration]
12.05.03 Arbitration
a) Notice
b) Reply
c) Appointment of a Third Arbitrator
d) Subcontracts
e) Confidentiality
f) Hearing
g) Ruling
h) Costs
i) Supplementary Rules
12.06 Reimbursement of Legal Costs
12.07 Election
12.08 Counterparts
12.09 Amendment
12.10 No Waiver of Rights
12.11 Electronic Transmission
12.12 Language
13.00 TERMINATION
13.01 Mutual Consent
13.02 Without Notice
13.03 With Notice
14.00 EFFECTIVE DATE
15.00 DURATION
15.01 End of Agreement
15.02 Survival
16.00 SCOPE


SCHEDULE 0.01.06 – CLOSING AGENDA