11:48 27 March 2013
In its simplest sense, surety bond is a promise to pay the obligee a certain amount if the principal is unable to meet some obligations or fail to fulfill the terms of the contract. The surety protects the obligee against losses and it pays out cash to the limit of guarantee in the event that the principal failed to deliver what was promised.
There are usually three parties involved in the contract. These are the oblige (the recipient of the obligation), the principal (who will perform the contractual obligation), and the surety (the one who assures the oblige that the principal can perform the task).
Included in the surety bond category are bid bonds (guarantee that should a contractor is awarded he bid, he will enter into contract), performance bond (guarantee that the contractor will perform exactly what was specified in the contract), and maintenance bond (guarantee that the contractor will provide facility repair for a specified period of time).
Surety bonds are very crucial for business owners who enter into contracts frequently. This will give you a guarantee that you’ll get exactly what you were promised even if the principal fails to deliver.
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