Cancellation of an escrow account contract and liquidation of the bank as grounds for its termination under Ukrainian law

Abstract

The article deals with the peculiarities of legal regulation of cancellation of an escrow account contract as one of the grounds for its termination under Ukrainian legislation. The author proves that unilateral withdrawal from an agreement is inadmissible, since it contradicts its nature and purpose. It is argued that the provision of an escrow account contract on the possibility of unilateral cancellation may be declared invalid by a court. The author examines the procedure for the parties to ensure the cancellation of an escrow account contract. If the parties agree on its cancellation, the account holder submits an application to the bank, and the beneficiary also provides his/her written consent to this. It is established that the agreement is cancelled from the moment the bank receives the last of the following documents: the account holder's application and the beneficiary's written consent to terminate the agreement, and if the account holder's application and the beneficiary's written consent are contained in one document, from the moment the bank receives such document. The next steps in the cancellation procedure are the transfer of funds from the escrow account to the account of the holder and/ or beneficiary (depending on the instructions in the application and written consent) and the closure of the account by the bank. The author argues that if the beneficiary does not consent to the cancellation of the contract, the account holder may initiate such cancellation in court. The contract may be terminated by a court decision in case of a material breach of the agreement by the other party, as well as due to a material change in the circumstances which guided the parties when entering into the agreement. The author examines certain aspects of termination of an escrow account contract based on liquidation of the bank in which it is opened, as well as termination of a securities escrow account contract in case of termination of activities of a depository institution. The author concludes that in case of liquidation of the bank in which the escrow account is opened, payments to depositors should be made on the basis of the Law of Ukraine «On the Deposit Guarantee System for Individuals».