The term “paymaster” means different things to different people. Or, perhaps more appropriately, it depends on the transaction and the role of the payment intermediary.

Some people use the terms “paymaster” and “escrow agent” interchangeably; however, there is a difference in the services provided and the responsibilities that the payment intermediary owes to the parties.

A paymaster is in effect a payment agent. The paymaster receives payments on behalf of a client for goods or services already provided, and then disburses those payments pursuant to an agreed schedule or pursuant to the client’s instructions. In this case, no duties are owed to the sender of the funds, only to the client on whose behalf the funds are received (the recipient). A paymaster is commonly used for the receipt and disbursement of commissions that are earned, especially when those commissions are to be disbursed to multiple brokers or intermediaries. A paymaster can also be used to pay a client’s creditors or to allocate funds earned on one project (or group of projects) to new projects.

An escrow agent receives and disburses payments for goods or services pursuant to terms set forth in a purchase or services agreement. In this case, the purchaser, the seller, and the escrow agent are parties to the escrow agreement, and the escrow agent only disburses payments as set forth in the purchase agreement (for instance, once the goods are received or the services have been provided). Payments are often released only upon joint instructions by both the purchaser and the seller. It is important to note that unless both the buyer and the seller are parties to the agreement with the payment intermediary, it is not an escrow arrangement, and the payment intermediary only owes duties to its client.

Whitley LLP Attorneys at Law has served as both paymaster and escrow agent in various types of transactions. If your company has a high-value transaction that requires the expertise and care of a paymaster or escrow agent, contact Whitley LLP Attorneys at Law today. We will work with you to ensure your transaction goes smoothly.