http://bullfroginsurance.com/bonding/ is a guarantee of adherence to a certain law, obligation or court order. Each bond comes with its own unique circumstances, requiring its participants to protect each other from financial harm. The participants of commercial surety bonds include;
- Principal– Is the person who purchases the bond as an assurance of future work performance.
- Surety– This is the person financially guaranteeing the principal to act in accordance with the terms spelt out in the bond.
- Obligee– A person who requires the bond and is entitled to minimize the likelihood of a financial loss.
It is a requirement by the law that the obligee recovers loses made by the principal, he or she fails to fulfill or act in accordance with the terms of the contract. However, in the recovery process, the obligee is only required to recover an amount not exceeding the cost of the bond.
There are certain professional bodies that require their members to be competent enough in order to gain public confidence. This requires them to obtain practices in order to transact any business on behalf of the body. When a firm is bonded, it means that some of its money is controlled by the state and clients can be indemnified in case they make claims against the business.
Types of Commercial Surety Bonds
- License and Permits– This is a requirement by the federal or county state as a prerequisite in order to operate a certain business. It shows a commitment by the obligee that the business will comply or act within the underlying statutes of the federal or county laws and regulations. Examples of bonds under this include customs bonds, environmental protection bonds among many others.
- Court Bonds– These are bonds that are prescribed by the courts of law. They can be either judicial or fiduciary bonds. Judiciary bonds are as a result of a court litigation as remedy for any legal action that could have been taken by the court. Judicial bonds include injunction and appeal bonds. Fiduciary bonds bind someone’s property under the care of another individual who assures the court of performing specified tasks in relation to the property, faithfully. Examples include trustee and administrator bonds.
- Public Official Bonds– These are bonds seeking to guarantee the confidence of elected persons to public offices that they will faithfully execute their duties as required. They include notaries public bonds, credit union volunteers bonds, judges and magistrates bonds among others.
- Miscellaneous Bonds– These are bonds that support private or unique business relationships between different individuals. They include lost securities bonds, self-insured guaranty bonds and union bonds.