Source code escrow: when it is worth it

Source code escrow is asked for in most software deals of any size and is worth having in a minority of them. It protects a customer against a supplier that can no longer support software the customer depends on, by holding the source code with a third party for release on defined events; it does not protect against a bad product, a bad supplier or the customer's inability to use the code once it has it. This page explains when escrow earns its cost, and how the provisions are drafted when it does. I draft escrow provisions within a software agreement, or a standalone escrow schedule, for a fixed fee of £995, delivered in five working days.

Who this is for

Businesses in England and Wales buying software or platforms they will depend on, and software suppliers asked for escrow by their customers, who want to know whether it is worth having and what the provisions should say if it is.

What matters in source code escrow

What escrow protects against and what it does not

Escrow addresses one risk: that the supplier ceases to exist or to support the software, leaving the customer with a running system it cannot maintain. It does not protect against defects, against the supplier's poor performance while it is trading, or against the customer's lack of the skills and environment to build and run the code; a customer that could not maintain the software with the source code in hand gains nothing from escrow, and a supplier whose software is a commodity replaceable in a month is not a candidate for it. Escrow is worth its cost where the software is bespoke or deeply embedded, the supplier is small, and replacement would take longer than the business could survive.

The structure and the agent

Escrow is a three-party agreement between the supplier, the customer and an escrow agent, under the agent's standard terms, with the supplier depositing the source code and materials, the agent holding them, and the customer entitled to release on the events the agreement defines. The software agreement should oblige the supplier to enter the escrow agreement, to deposit within a stated period and to keep the deposit current, with the customer's remedies if it does not; a clause in the software agreement alone, with no agent and no deposit, is a promise of escrow rather than escrow.

Release events and how release works

The release events should be defined precisely: the supplier's insolvency (administration, liquidation, a moratorium), its ceasing to trade or to support the software, and a material breach of its support obligations unremedied after notice; the customer applies to the agent with evidence, the supplier has a short period to object, and the agent releases or refers the dispute to the procedure in the escrow agreement. Release on the supplier's insolvency is a matter of contract with the agent and does not depend on the insolvency officeholder, which is the point; the customer's continued licence to the software is protected against the supplier's insolvency by the terms of the licence itself.

Verification and what is deposited

A deposit that cannot be built is worthless, and the agreement should specify what is deposited (source code, build scripts, third-party components or their identification, documentation, the environment description) and the verification level: a check that the deposit exists and matches its description, or a full build test at the customer's cost. The supplier should update the deposit on each major release and at least at stated intervals, with the agent confirming each deposit to the customer, because the value of escrow depends on the deposit matching the version the customer runs.

The licence to use released code, and SaaS escrow

On release the customer needs a licence to use, modify and maintain the source code for its own business, which the software agreement should grant conditionally, taking effect on release, under the Copyright, Designs and Patents Act 1988, with confidentiality obligations continuing and no right to distribute; the customer may engage third parties to maintain the code under those obligations. For SaaS, escrow of the source code alone does not give the customer a working service, and a SaaS escrow needs the hosted environment, data and deployment materials as well, or an alternative: regular data exports, a right to step in to the hosting account, or a continuity arrangement with the cloud provider, which are often more useful than escrow.

Cost, who pays and the drafting

Escrow agents charge set-up and annual fees and verification fees, and the agreement should say who pays: usually the customer, since escrow is for its benefit, or shared where the supplier deposits once for many customers under a multi-beneficiary arrangement. The provisions should sit in the software agreement as a clause obliging the supplier to maintain escrow and granting the conditional licence, with the escrow agreement itself on the agent's terms attached or referred to, and the supplier's insolvency-related obligations drafted with section 233B of the Insolvency Act 1986 in view, which restricts a supplier from terminating supply on the customer's insolvency but does not limit the customer's rights on the supplier's.

What it costs

SaaS or technology contract, £995. One contract drafted for how your product or service is sold, delivered and supported. Five working days.

Buying online forms the engagement on payment. The scope is what the saas and technology contracts page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• A bespoke contract drafted for how your product is sold, delivered and supported
• Service levels you can meet, with remedies that are proportionate rather than aspirational
• A liability position that is defensible and will survive enterprise procurement
• IP and data provisions that fit together rather than contradicting each other
• A commercial note on where you will get pushback and what is worth conceding
• One round of amendments

What is not included

• Negotiating individual enterprise deals, which I quote separately
• Advice on the law of jurisdictions outside England and Wales
• Technical security certification or audit
• Regulatory advice for regulated sectors such as financial services or health

Questions I am often asked

Our customer insists on escrow for our SaaS product. Is it any use to them?

Source code alone is of little use for a hosted service. Offer what is useful: regular data exports, deployment materials and a continuity route, and escrow of the code if they still want it. The agreement can provide all of them.

Who pays for escrow?

Usually the customer, because it is for the customer's protection; a supplier that deposits once for many customers can share the cost. The agreement says which.

Can we get the code if the supplier just stops answering emails?

Only if ceasing to support the software is a release event and the escrow agreement's procedure is followed with evidence. A clause that releases on insolvency alone does not cover a supplier that has gone quiet.

Related guidance and services

• SaaS and technology contracts, £995, the service this page describes
• Contract review, £495
• Software development agreement when you are the client
• Software support and maintenance agreement

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: September 2026. Email geoffrey@caesar.co.uk.