Most Common Surety Bond Types In 2012
By definition, surety bonds are a contract of some sort that promises to pay one party, referred to as the obligee, a specified amount on the contract in case the other party, known as the principal, fails to meet the responsibilities also defined in the contract. So basically surety bonds act as assurance to a party in case something doesn't go their way.
Also, another party, referred to as the surety, assures the obligee that the responsibilities as specified in the contract will be performed accordingly by the principal.
Common types of bonds included here are:
- Bid Bonds - Guarantees the obligee that the winning bidder will enter the contract.
- Performance Bonds - A guarantee that the work would be delivered as specified in the contract.
- Maintenance Bonds -Work like a warranty, the contractor would provide repairs and maintenance for a certain time span.
- Supply / Labor and Materials Bonds -The contractor would cover expenses over the supplies needed, on terms stated in the contract.
So What Are The Types Of Surety Bonds?
There are lots of surety bonds out there, and heck these bonds provide the framework needed for many businesses and investments to proceed. The most common surety bond types in 2012 are enumerated below:
- Contract Surety Bonds - These kinds of bonds are used heavily in industries, especially in the manufacturing, product development, and construction segments. These bonds provide the guarantee to the obligee (primarily the investor or project owner) that the principal (contractor or developer) will complete the project in time and according to the contract.
A lot of investors venturing through freelancers (especially in the software development field) use surety bonds to protect their investments.
- Notary Bonds - A type of public official surety bond that guarantees all documents (affidavits and other legal documents) are free from errors or fraud, thereby minimizing risks. This type of bond enables the obligee to receive financial compensation in case the document is proven fake or the notary commits a mistake on their part.
- Commercial Surety Bonds - These covers a wide range of specific bonds types, the most common of which are enumerated below:
- License Bonds - A kind of commercial surety bond that insures the government and other agencies that the principal, which in this case is the one given the license, would operate under the required business laws and practices (such as paying taxes and giving employee benefits). The obligee here is a government body or agency.
- Judicial and Fiduciary Bonds - Judicial bonds are posted by those who are after court remedies. On the other hand, Fiduciary bonds are filed in probate courts and provides guarantee that the courts will perform their duties as they should be, especially in cases where money and properties are involved.
- Miscellaneous Bonds - This kind includes bonds created from securities, damage control (such as hazardous wastes disposal assurances), worker's compensations, and even union bonds.
Aside from what was discussed above, there are actually still many different kinds of surety bonds. Some of which are even fully customized to suit the needs of both parties. Hence don't limit yourself to the above kinds when looking for surety bonds to fit your needs.
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