New York State Notary Practice Exam

What is the placement of an instrument in the hands of a depository who must deliver it to a third person upon the happening of an event called?

1. Escrow

2. Contract

3. Conveyance

4. Duress

The correct answer is: Escrow

The correct term for the placement of an instrument in the hands of a depository, who is obligated to deliver it to a third person once a certain event occurs, is indeed known as escrow. In an escrow arrangement, the depository, often referred to as the escrow agent, holds the item securely until the specified conditions or events are fulfilled, at which point the item is released to the intended recipient. This process is commonly used in various transactions, such as real estate deals, where funds and property titles may be held in escrow until all contractual obligations are met. The significance of escrow lies in its function as a safeguard, ensuring that all parties uphold their agreement before the transfer is finalized. In contrast, while a contract outlines the terms and obligations of the parties involved, it does not specifically refer to the holding of instruments for delivery upon certain conditions. Conveyance refers to the act of transferring ownership, often in real estate, rather than the holding or delivery mechanism. Lastly, duress relates to situations where someone is forced to act against their will, which does not pertain to the holding or delivery of an item.