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Legal Good Funds Law Agreement

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LEGAL GOOD FUNDS LAW AGREEMENT

This Legal Good Funds Law Agreement (this Agreement) is entered into as of by and between Payor: , with principal address ; and Payee/Escrow Agent: , with principal address .

RECITALS

WHEREAS, Payor and Payee are parties to a transaction described as (the Transaction), involving funds in the aggregate amount of ; and

WHEREAS, the parties desire to ensure that funds delivered in connection with the Transaction constitute "good funds" for purposes of applicable good funds law, regulatory requirements, and to allocate responsibility for delivery, confirmation, acceptance, and any remedies related to non-good funds; and

WHEREAS, the parties intend by this Agreement to set forth binding obligations with respect to the timing, form, and confirmation of funds delivered to Payee in connection with the Transaction.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. DEFINITIONS

1.1 "Good Funds" means funds that are irrevocable, unconditional, and immediately available for withdrawal by Payee for all purposes contemplated by the Transaction, and that are freely transferable through final settlement into Payee's operating account without risk of return, reversal, delay, or chargeback under applicable law or banking rules.

1.2 "Acceptable Funds" means the means of payment that, when delivered and confirmed in compliance with this Agreement, will constitute Good Funds. Acceptable Funds shall include the following methods as selected below:


2. DELIVERY, CONFIRMATION AND TIMING

2.1 Payor shall deliver Good Funds in accordance with the form and timeline agreed between the parties. The total amount to be delivered as Good Funds is .

2.2 Delivery Deadline. Payor shall effect delivery of Good Funds so that the funds are received and confirmed by Payee no later than (the Delivery Deadline). If Payor fails to deliver Good Funds by the Delivery Deadline, Payee may treat such failure as a material breach.

2.3 Bank and Account Information. For wire transfers and other permitted electronic payments, Payor shall transmit funds to the following account:

3. ACCEPTANCE, REJECTION AND RETURN OF FUNDS

3.1 Confirmation. Payee shall provide written or electronic confirmation to Payor that funds have been received in Good Funds form and are available for disbursement. Confirmation shall specify the amount, the form of funds received, and the date and time of final availability.

3.2 Rejection. Payee may reject any form of payment that does not constitute Good Funds under this Agreement or under applicable law. If funds are rejected, Payee shall promptly notify Payor and provide a reasonable description of the basis for rejection. Payor shall, within the timeframe stated in the notice, replace rejected funds with Good Funds in an acceptable form.

3.3 Return. If rejected funds are returned to the originator, Payor shall bear all fees, losses, charges, and consequential expenses incurred by Payee or third parties as a result of such return.

4. REPRESENTATIONS AND WARRANTIES

4.1 Payor represents and warrants to Payee that: (a) Payor has full power and authority to enter into this Agreement and to cause delivery of the Good Funds; (b) funds delivered will be lawful, free of any lien, claim, or encumbrance; (c) no person or entity has any right to offset, reclaim, or charge back such funds; and (d) the delivery of funds will not violate any applicable statute, regulation, or order.

4.2 Payee represents and warrants to Payor that Payee will act in accordance with this Agreement and will apply commercially reasonable procedures to verify the finality and availability of funds prior to disbursement.

5. INDEMNIFICATION; LIMITATION OF LIABILITY

5.1 Indemnification by Payor. Payor shall indemnify, defend and hold harmless Payee, its officers, directors, employees, agents and affiliates from and against any and all losses, liabilities, claims, damages, costs and expenses (including reasonable attorneys' fees and costs) arising out of or resulting from Payor's breach of any representation, warranty, obligation, or covenant under this Agreement or from Payor's failure to deliver Good Funds.

5.2 Limitation of Liability. Except for liability arising from willful misconduct or gross negligence, neither party shall be liable to the other for consequential, punitive, or exemplary damages arising out of this Agreement.

6. REMEDIES; ATTORNEYS' FEES

6.1 Remedies. The remedies provided in this Agreement are cumulative and in addition to any other remedies available at law or in equity. Without limiting the foregoing, Payee may retain any funds received, refuse disbursement, or set off amounts against other funds in its possession where appropriate.

6.2 Attorneys' Fees. The prevailing party in any action to enforce rights under this Agreement shall be entitled to recover reasonable attorneys' fees and costs, in addition to any other relief awarded.

7. NOTICES

7.1 All notices, demands, consents, approvals or other communications required or permitted under this Agreement shall be in writing and delivered to the address specified below for each party or to such other address as such party designates in writing.

8. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the State of , without regard to conflict of law principles.

9. ENTIRE AGREEMENT; AMENDMENT; WAIVER

9.1 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and communications, whether written or oral.

9.2 Amendment. No amendment, modification or waiver of any provision of this Agreement shall be effective unless in writing and signed by both parties.

9.3 Waiver. No failure or delay by any party in exercising any right or remedy hereunder shall operate as a waiver thereof.

10. SEVERABILITY; COUNTERPARTS

10.1 Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable in any respect, such provision shall be severed and the remainder of this Agreement shall remain in full force and effect.

10.2 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Signatures delivered by electronic means shall be treated as original signatures.

11. SURVIVAL

Provisions of this Agreement that by their nature should survive termination or expiration of this Agreement, including but not limited to Sections 4 (Representations and Warranties), 5 (Indemnification), 6 (Remedies; Attorneys' Fees), 7 (Notices), 8 (Governing Law), 9 (Entire Agreement), and 10 (Severability), shall survive any termination or expiration of this Agreement.

12. MISCELLANEOUS PROVISIONS

12.1 Execution. The parties agree to execute and deliver such additional documents and take such additional actions as may be reasonably necessary to carry out the purposes and intent of this Agreement.

12.2 Interpretation. Titles and headings are for convenience only and shall not affect the interpretation of this Agreement.

Payor Printed Name:

By:

Date:

Payee/Escrow Agent Printed Name:

By:

Date:

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What the Legal Good Funds Law Agreement Is and When it Matters

A Legal Good Funds Law Agreement documents the source, timing, and clearance requirements for funds used in a closing or disbursement, typically in real estate and escrow contexts. It specifies acceptable payment types, verification steps, and conditions precedent to release, helping parties and title/escrow agents confirm that funds are 'good' and available before recording or transferring ownership. The agreement reduces the risk of returned items, delayed recording, or lender refusal by clarifying responsibilities, thresholds, and verification procedures before closing completes.

Why a Good Funds Agreement Matters and Its Legal Basis

A Good Funds Agreement protects parties by requiring verified, cleared funds before disbursement and reducing settlement risk; its electronic execution is enforceable under federal ESIGN law (15 U.S.C. §7001) and state UETA frameworks (1999).

Why a Good Funds Agreement Matters and Its Legal Basis

Who Commonly Prepares or Signs This Agreement

The agreement is also used by real estate brokers, closing agents, and legal counsel where jurisdictional or lender-specific good‑funds rules apply.

  • Title and escrow officers ensuring cleared funds for recording and disbursement.
  • Lenders verifying borrower wire or certified funds meet loan conditions.
  • Buyers and sellers confirming payment source, timing, and indemnities.

Core Elements Included in a Professional Good Funds Agreement

A complete agreement identifies parties, defines acceptable payment instruments, sets verification and cutoff times, assigns responsibility for returned items, and includes dispute resolution and governing law provisions.

Parties

Full legal names and roles (payer, payee, escrow/title agent) to establish authority and attribution.

Payment Types

Specify allowed instruments (wire transfer, certified check, ACH, cashier's check) and any prohibited forms.

Clearance Rules

Define when funds are considered cleared (bank credit, irrevocable confirmation, or settlement) and related cutoff times.

Verification Steps

Describe identity checks, bank confirmations, and documentation required before disbursement.

Liability Allocation

Assign responsibility for returned or fraudulent items, including indemnity and fee recovery terms.

Governing Law

State choice of law, venue, and any lender-specific conditions controlling interpretation and enforcement.

Step-by-Step: Completing and Finalizing the Agreement

Follow these steps in order to prepare, verify, and close on funds using the Good Funds Agreement.

  • 01
    Prepare document: Populate parties, amounts, payment method, and effective date.
  • 02
    Attach verifications: Include wire confirmations, bank letters, or certified check details.
  • 03
    Obtain signatures: All authorized signers sign and date the agreement.
  • 04
    Verify clearance: Escrow/title confirms funds cleared before disbursement.

Typical Digital Workflow Settings for eExecution and Routing

Configure authentication, routing, and storage to match lender and state requirements prior to sending for signature.

Field Configuration
Recipient authentication Email link with optional SMS code or knowledge-based verification
Routing order Sequential routing by role (payer → escrow → lender)
Template reuse Save as template for repeat closings to ensure consistency
Storage destination Export signed PDF to Box, Google Drive, or internal ECM

Where to Send and How Documents Are Routed

Good Funds Agreements typically route between payer, escrow/title agent, lender, and closing attorney; configure addresses and contacts before sending.

  • Prepare and attach: Upload contract and verifications to the signing platform.
  • Add signers: Enter emails and assign signing roles and order.
  • Send for signature: Deliver by email link or secure signing portal.
  • Distribute final copies: Automatic delivery to all parties and storage location.

Technical and Platform Considerations for eSigning

Ensure the selected method meets lender, title, and any state-level authentication or record-retention requirements.

  • File formats: PDF, Word DOCX, HTML, Excel supported for upload
  • Integrations: Salesforce, Microsoft 365, NetSuite, Google Workspace available
  • Authentication: Email, SMS code, KBA, or advanced signer authentication

How a Good Funds Agreement Differs from an Escrow Agreement

Compare fundamental distinctions so parties choose the appropriate document and avoid overlapping obligations at closing.

Criteria Good Funds Agreement Escrow Agreement
Primary focus fund verification custody and disbursement process
Typical author lender or escrow agent escrow/title company
Use timing pre‑closing clearance ongoing custody until conditions met
Legal effect condition precedent for disbursement contractual custody obligations

Typical eSignature Vendor Pricing and Feature Snapshot for Document Execution

Comparison of starting pricing and common enterprise features; signNow is listed first to reflect plan and feature data available for secure electronic execution.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial Varies by plan Varies by plan Varies by plan Varies by plan
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No
Envelope Cap No cap 100 envelopes/user/year Varies by plan Varies by plan Varies by plan

Common Timing Rules and Cutoff Considerations

Key deadlines differ by lender and bank. Confirm cutoff times, wire settlement windows, and recording timelines to avoid funding delays.

Wire cutoff:

Morning bank cutoff often required for same‑day credit

Certified check clearance:

May require multi‑bank verification before disbursement

Recordation:

Recording typically occurs after funds verified and disbursed

Lender conditions:

Lender may require verified funds before funding loan proceeds

Escrow holdbacks:

Specified time windows to release remaining funds

Key Milestones from Preparation to Recording

A sequential view of the most important processing stages and the typical action at each milestone.

01

Document Preparation

Draft agreement, attach bank confirmations and identity documents.

02

Signatures Collected

All parties execute the agreement, including any required witnesses.

03

Funds Verified

Escrow/title confirms clearance and irrevocable bank credit.

04

Close and Record

Disburse funds and record documents with county recorder.

Security and Compliance Considerations for Electronic Execution

Encryption: TLS 1.2/1.3 in transit
At Rest: AES-256 encrypted storage
Certifications: SOC 2 Type II
Healthcare: HIPAA compliant (BAA required)
Regulatory: 21 CFR Part 11 capable
Legal Acts: ESIGN and UETA compliance

Consequences of Inaccurate or Incomplete Good Funds Agreements

Closing delay: Delayed recording or disbursement
Financial liability: Costs for returned or fraudulent funds
Contract unenforceability: Disputed payment obligations
Regulatory fines: State or lender penalties
Escrow forfeiture: Potential loss of deposit
Reputational harm: Loss of trust and future business

Practical Tips to Reduce Risk and Speed Processing

Adopt consistent practices to confirm identity, fund clearance, and documentation before final disbursement to reduce errors and lender pushback.

Verify identity early
Perform signer identity checks and obtain required authorizations before wiring funds; late identity issues often force re-tracing and delay closing by days.
Require bank confirmations
Obtain written bank confirmation for large wires or certified funds; confirmations reduce fraud risk and provide immediate verification for escrow agents.
Use clear cutoff times
Publish specific bank cutoff and settlement deadlines in the agreement to prevent last‑minute confusion and to align parties and lenders.
Retain audit trail
Keep electronic logs, timestamps, and signed PDFs to support enforcement, regulatory compliance, and any post-closing dispute resolution.

Real-World Examples of Using Good Funds Documents

These short examples show how organizations use clear fund-verification processes to avoid delays and disputes during closing.

Optica Ventures LLC

The interface is simple and easy-to-use for our team; more importantly, it is just as easy for our customers.

  • Focus on usability in closing workflows.
  • Optica streamlined verifications and reduced back-and-forth with lenders by consolidating bank confirmations and signatures into a single executed packet.

Martin Properties

I can process and execute all of these documents online with 100% compliance and built-in security.

  • Mobile and offline signing enabled.
  • Martin Properties eliminated in-person fund drop-offs, shortened closing windows, and reduced returned-item incidents by standardizing the Good Funds Agreement for every transaction.

Frequently Asked Questions About Good Funds Agreements

Answers to common questions on legality, signing, notarization, and storage for Good Funds Agreements used in financial and real estate closings.


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