Source code escrow agreements protect a software licensee against a vendor's failure by depositing the underlying source code with a neutral third-party escrow agent, to be released to the licensee only if a defined triggering event occurs, such as the vendor's bankruptcy, cessation of business, or material failure to maintain the software.

Disputes commonly arise over whether a release condition has actually been met, whether the material actually deposited in escrow is complete and current enough to build and match the licensed software, the scope of the licensee's rights to use released code once it is handed over, and how the arrangement interacts with bankruptcy law, since section 365(n) of the Bankruptcy Code gives intellectual property licensees certain protections even if a bankrupt vendor formally rejects the license.

In a simulation, the likelihood that a release condition will actually be triggered functions as a dial feeding a continuity-risk scenario, letting a licensee model how exposed it really is to vendor failure given the specific release conditions negotiated into the escrow agreement.

Technology licensees negotiate clear, objective release triggers and periodic verification or deposit audits into their escrow agreements up front, specifically to reduce disputes later. When a vendor falters, licensees and escrow agents litigate over whether the negotiated release conditions have actually been satisfied before any code changes hands.