What is the primary function of 'escrow' in legal transactions?

The primary function of 'escrow' in legal transactions is to secure funds until the contractual obligations are met. This process involves a neutral third party holding the funds or assets involved in a transaction, ensuring that they are only released when all parties have fulfilled their respective contractual commitments. This is particularly important in real estate transactions, where the buyer's deposit is held in escrow to protect against any failure to meet the terms of the sale, providing assurance to both parties.

This mechanism fosters trust and minimizes the risk of fraud, as neither party can access the funds until the agreed conditions are satisfied. By placing funds in escrow, parties can proceed with greater confidence, knowing that their interests are protected throughout the transaction.