Who should pay for a Source Code Escrow Agreement?

Have you ever wondered who should pay for a source code escrow agreement? Should it be the software developer? What about the beneficiary? Or should the payment be equally split? Surprisingly, this is a question that is often asked by prospective clients before initiating a source code escrow agreement.

Before going into the nitty gritty of who should pay for what – lets remind ourselves of what source code escrow/software escrow is:

Source Code Escrow or Software Escrow is a three-party agreement between a software developer (the depositor), the end user (beneficiary) and the source code escrow vendor. The objective of a source code escrow agreement is to provide comfort to the end user that if the software developer is unable or unwilling to support the software, the code can be released to them. The software escrow agreement will outline the responsibilities of all the parties and usually includes the pre-defined release conditions.

As you can see from the above statement, a source code escrow agreement involves more than one party, therefore when it comes to paying for the agreement, there may be payment disputes that arise between both parties. On one hand, we’ve spoken to developers who believe their client / the beneficiary should pay for the agreement and all associated fees. On the other hand, we’ve also spoken to beneficiaries who believe the developer should pay for the source code escrow agreement for doing business with them.

Unfortunately, when it comes down to who should pay, there is no definitive answer. However, there are certain cases depending on the situation where the source code escrow fees may be borne solely by the developer, the beneficiary, or even split equally between both parties.

Reaching a mutual agreement on who pays

During the negotiation of a software license agreement, a clause for the inclusion of a source code escrow agreement is often included.

From our experience, if the developer is a young start-up company and the beneficiary is an enterprise organisation, the annual costs of the source code escrow arrangement will often be absorbed by the developer as they are willing to do whatever it takes to get the software license agreement executed. At this point, costs and data security of their sensitive IP are important factors when it comes to selecting a source code escrow vendor. To find out more about how to best select a source code escrow vendor for your company, read our latest blog here.

In the circumstance where the developer is more established and the beneficiary has made a request for the inclusion of source code escrow, the costs will often fall on the beneficiary.

There are situations where we have seen both the developer and beneficiary agree to split the fees in an amicable way to proceed with implementing a source code escrow solution.

Source Code Escrow Verification services to ensure that the deposited source code can be built into a working application would typically be requested by the beneficiary. As such, the fees associated with these services would be paid for by the beneficiary. In addition to the source code escrow vendor’s verification fees, the developer may charge the beneficiary for their own resources allocated to these testing exercises.

Source Code Escrow Fees

All Escrow London source code escrow agreements and SaaS escrow agreements include:

  • No Set up fees
  • Unlimited Automated Deposits (Git, SFTP, S3, Blob, Google Cloud)
  • Unlimited Git Repositories
  • Jurisdiction Choice Including: USA, Canada, UK, Australia, EU + many other countries
  • Free Legally Binding Source code escrow Agreement Template (Editable)
  • No Hidden Fees
  • Fast Turnaround
  • Optional Verification Services
  • Tier-1 Source code escrow Vendor
  • ISO 27001 / ISO 27017 Certified

To conclude, depending on the circumstance of the developer and beneficiary, there are different outcomes of who should pay for a source code escrow agreement. As a tuned in source code escrow vendor, Escrow London recommends that all payment terms are decided upon at the beginning of the agreement by all parties and this will ensure that the source code escrow process is as efficient as possible for all involved. For a quick, no obligation quote on an Escrow London software or SaaS escrow agreement (without any setup fees), please follow this link.

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About Escrow London

Escrow London is a global software escrow vendor with offices located in Atlanta, USA, London, United Kingdom and Sydney, Australia.

We have invested considerable resources into innovation to reinvent software escrow for a SaaS world. Escrow London provides a range of SaaS Continuity escrow solutions suitable for AWS, Microsoft Azure and Google Cloud Platform hosted SaaS applications. We support a wide range of clients includes major banks, central banks, insurance firms, technology companies and government.