> ## Documentation Index
> Fetch the complete documentation index at: https://docs.zen.land/llms.txt
> Use this file to discover all available pages before exploring further.

# How It Works

> The complete escrow lifecycle from creation to settlement.

## The Escrow Lifecycle

Every Zenland escrow follows a clear lifecycle. Here's what happens at each stage:

```mermaid theme={null}
graph LR
    A[Create] --> B[Pending]
    B --> C[Active]
    C --> D[Fulfilled]
    D --> E[Released]
    C --> F[Disputed]
    F --> G[Resolved]
```

***

## Step 1: Create the Escrow

<Steps>
  <Step title="Agree on Terms">
    Buyer and seller discuss and agree on the work, price, and timeline off-chain (chat, email, etc.)
  </Step>

  <Step title="Generate Contract PDF">
    The Zenland app generates a PDF containing all terms. This gets hashed and stored on-chain.
  </Step>

  <Step title="Choose an Agent (Optional)">
    Select a professional dispute resolver, or go "locked" for pure 2-of-2 escrow.
  </Step>

  <Step title="Fund the Escrow">
    Buyer deposits funds + pays the 1% protocol fee. Funds are now locked in the smart contract.
  </Step>
</Steps>

<Note>
  The escrow address is **deterministic** — it's known before you even create it! This address is embedded in your PDF for verification.
</Note>

***

## Step 2: Seller Accepts

Once the escrow is funded, the seller must **accept** the contract to activate it:

* **Accept** — Seller agrees to the terms, escrow becomes `ACTIVE`
* **Decline** — Seller rejects, buyer is refunded immediately
* **No Response** — After the acceptance window, buyer can cancel and get refunded

<Warning>
  If you're a seller, always review the terms carefully before accepting. Once active, you're committed to delivering.
</Warning>

***

## Step 3: Do the Work

With the escrow active:

1. **Seller** delivers the goods or completes the service
2. **Seller** marks the escrow as `Fulfilled` when done
3. **Buyer** reviews the delivery

<Tip>
  Communication is key! Use your preferred channel (Telegram, email, etc.) to stay in sync with the other party.
</Tip>

***

## Step 4: Settlement

The escrow can settle in several ways:

### Happy Path: Release

The buyer is satisfied and releases 100% of funds to the seller. Instant, no fees beyond the creation fee.

### Seller-Initiated Refund

The seller can **always** refund 100% to the buyer at any time. No approval needed. Use this for "no questions asked" returns.

### Auto-Release (Buyer Protection Expiry)

If the buyer doesn't respond after the protection period ends (and seller marked fulfilled), the seller can claim the funds.

### Mutual Split

Both parties agree to divide the funds. Propose a split (e.g., 60/40), the other party approves, funds are distributed.

***

## When Things Go Wrong: Disputes

If there's a disagreement:

<Steps>
  <Step title="Open Dispute">
    The buyer opens a dispute, pausing normal settlement.
  </Step>

  <Step title="Invite Agent">
    Either party invites the pre-selected agent to review the case.
  </Step>

  <Step title="Agent Resolves">
    The agent reviews evidence and decides the split. Agent fee is deducted.
  </Step>
</Steps>

<Card title="Learn about disputes" icon="gavel" href="/user-guides/resolving-disputes">
  See the full dispute resolution process →
</Card>

***

## Summary: State Transitions

| State             | Description                        | Next States                             |
| ----------------- | ---------------------------------- | --------------------------------------- |
| **Pending**       | Escrow created, waiting for seller | Active, Refunded                        |
| **Active**        | Seller accepted, work in progress  | Fulfilled, Disputed, Released, Refunded |
| **Fulfilled**     | Seller marked as complete          | Released, Disputed                      |
| **Disputed**      | Buyer raised an issue              | Agent Invited, Split, Refunded          |
| **Agent Invited** | Waiting for agent decision         | Resolved, Split, Refunded               |
| **Released**      | Funds sent to seller ✓             | *Terminal*                              |
| **Refunded**      | Funds returned to buyer ✓          | *Terminal*                              |
| **Split**         | Funds divided between parties ✓    | *Terminal*                              |