A Surety bond is an undertaking by one party (the surety) to become accountable to another party (the oblige) for the performance of an obligation or undertaking by the third party (the principal). It is a promise to provide credit, if and when needed, to ensure the faithful performance of the obligation.
Characteristic of Surety Bonds
1. Three party contract
The principal is “the person primarily liable”. For example, the contractor who builds a house for another is the principal.
The obligee is “the party to whom someone else is obligated under a contract”. In the above example, the owner of the dwelling is the obligee. The obligee is the party whom the bond is given.
A surety is “one who undertakes to pay money or to do any other act in the event that his principal fails therein”, for example, the bonding(insurance) company.
2. No Losses expected
Surety is on the extension of credit without risk. Theoretically, the surety expects no losses to occur.
3. Principal liable to surety
When the principal fails in its obligation to the obligee, the surety must fulfill the promise. The principal is then obligated to the surety for amounts paid.
4. Bond premium
Although the word premium is commonly used, it is a misnomer. As surety underwriting does not contemplate losses occurring, the sum charged for pre-qualification and other company expenses is more appropriate described as a service fee than a premium.
5. Bond limit (Penalty)
The limit represents the amount of the penalty that the surety is prepared to pay in the event the principal should default. The penalty of the bond remains unchanged throughout the period of the contract and does not reduce during the performance of the obligation.
6. Of indeterminate length and non-cancellable
Some types of surety bonds are non-cancellable and terminate only when the principal’s obligations have been fulfilled.
7. Written contract
A surety contract must be provided in writing and executed under seal of the surety and the principal. Oral contracts are not binding on the surety.
We specializes in bonding throughout BC and Ontario. Some of the particular bonds we offer include:
Fiduciary Bonds are for probate and bankruptcy needs. These bonds are arranged by lawyers whose clients are required to file security to comply with the courts or the public guardians and trustees. They guarantee compliance with the requirements of law for faithful performance of duties.
- Administration Bond
- Committee Bond
- Guardianship Bond
- Foreign Executor Bond
License and Permit Bonds: They are for qualifying those who need to obtain a license or a permit to handle a particular privilege or conduct a particular business. License and permit bonds guarantee compliance with the statute, by law or regulation under which the principal is compelled to act. The laws are for protecting the public against incompetence, misrepresentation, fraudulent dealings, physical damage, or bodily harm.
Customs and Excise Bonds Customs and excise bonds are for the benefit of the federal government and guarantee that either taxes or duties or both will be paid by the principal when invoiced by the government.
These bonds may be required for the following regulations:
- Customs brokers licensing regulations
- Temporary importation regulations
- Transportation of goods regulations
- Display goods temporary importation regulations
- Customs bonded warehouse regulations
- Customs sufferance warehouse regulations
- Accounting for imported goods and payment of duties
- Duty-free shop regulations
- Other authorities may be accepted
- Contract Bonds for
- – General contractors
- – Subcontractors
- – Service contractors
- – Heavy-equipment contractors
- – Suppliers
- – Manufacturers
Here are some of the clients who may benefit from surety bonds.
- Gas and Electrical Contractors
- Prepaid Contractors
- Vocational Schools
- Driving Schools
- Executors, Committees, and Guardians
- Trucking Operators
- Custom Brokers
- Breweries and Distilleries
- Warehouse Operators
- Direct Selling Businesses
- Foreign Employment Agencies
- Auto Dealers
- Travel Agencies
- And more….
Bond companies brokering
Unlike direct insurers or insurance agents, we work for our clients to find best coverage from large bond markets.