Deposit agreement

Definition

A deposit agreement governs the holding of money, securities, goods or documents by a custodian on behalf of one or more parties, setting out the conditions for safekeeping and release. It is common where value must be parked safely pending a condition, such as a transaction closing or a dispute outcome, and overlaps with escrow arrangements. Core terms cover the custodian's duties, release triggers, fees and liability.

Example

In a share purchase, part of the price is placed under a deposit agreement and released only once warranty claims are cleared after closing.

Why this is a business risk

Ambiguous release conditions in a deposit agreement can paralyse a transaction if the parties disagree on whether the trigger has been met. If the custodian has wide discretion, a party may find itself unable to access its own funds until lengthy legal proceedings resolve the dispute. A poorly negotiated custodian liability cap can leave depositors without recourse if the custodian misapplies the funds.

How to manage it

• Define release conditions with objective, measurable triggers so there is no room for disagreement about whether they have been satisfied.
• Specify what happens if a release condition is not satisfied by a long-stop date: whether the deposit is returned, forfeited or held pending further agreement.
• Confirm the custodian's duties, liability and insurance so you understand the level of protection for the deposited assets.
• Track the long-stop date and any interim milestone dates in your contract system so you know when to expect or demand release.

Legal references

• BW 7:600 Dutch Civil Code: safekeeping Dutch law

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.