My SO has given me a new contract for the poeple selling the CopSync in car computers. It has several things, including a "non-negotiable" requirement that the county put the funds with a third party escrow, which seem wrong to me.

Anyone have any experience with these?

Isn't an escrow one of those giving / lending money, name or other thing of value issues?

Lisa L. Peterson
Nolan County Attorney

Nothing is "non-negotiable" in private contracting world. Why would they need money put in third party escrow? Source code in third party escrow in case the company goes belly up, but Nolan County will always be there.

We don't have CopSync.

The only reason I can think of for such a clause, is that a lender of CopSync requires that the money be placed in a lockbox account to insure that the lender will be properly repaid. From CopSync's perspective, they cannot negotiate this with a customer b/c they are contractually obligated to make sure all gross receipts go into the lockbox account.

Can a county do this? I see no other situation in which counties place funds in escrow - and it makes me very nervous for us to turn money over to a third party.

At this point, I'm taking the stance that the county cannot / will not sign a contract with an escrow clause unless someone can show me that we may do so. I feel like the ant trying to educate the gorilla - one would think that a lender involved with government contracts would understand the situation!

Lisa L. Peterson
Nolan County Attorney

If I read your original post correctly, the commissioners are going to approve a contract. Under the terms of that contract, the county will receive a good or service (CopSync) and the county will pay a sum of money (either over time or in a lump sum). The terms of the contract call for the funds paid by the county (which would typically be paid directly to CopSync) to be paid into a third party escrow account. I don't see any problem with this at all.

The very nature of an escrow account is that it is an account held for the benefit of another. In this case, the escrow account was created by another party for the benefit of CopSync (and to protect the creditor's interest of course).

My guess is that your county does this on every real estate transaction (places either a part or all of the money in an escrow account with the title company).

I agree with Robert, however, a vendor with this short of a leash will probably not be around for support for the software system or much of anything else. Usually folks this tied to their creditor cannot survive.

We are currently negotiating a contract with COPsync and have no such escrow requirement (can't be all that NON -negotiable). I would also be hesitant to enter into such an arrangement.

I think you will be surprised how quickly a "non negotiable" clause suddenly becomes negotiable when you inform the vendor that their contract is being rejected. That being said, the third-party escrow agent should have a fiduciary duty to both parties, so that if COPSync goes belly up and can no longer support the services they promised to provide, the escrow agent is obligated to return the unused money in the account to the County. (You should probably make sure the contract specifies something like that.) Assuming the escrow portion of the agreement protects the County's interests along with those of COPSync, then I do not think there is anything illegal about the arrangement. But I agree with the others that the inclusion of the clause does not speak favorably for the viability of COPSync.