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SURETYSHIP DEFINED
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MAIN CLASSIFICATION OF BONDS
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NON-JUDICIAL AND JUDICIAL BONDS
Suretyship exits when one
party guarantees on behalf of another party the performance of
an obligation in favor of the third party. There are three
parties in a contract of suretyship, namely the SURETY
or the party who provides the guarantee or issues the bond,
the PRINCIPAL/OBLIGOR or the party in whose behalf the
guarantee is executed or the bond issued, and the OBLIGEE in
whose favor the bond is issued. In the strict sense,
suretyship refers to the contract among the surety, the
principal, and the obligee while bond refers to the
legal instrument embodying said agreement of the parties which
the principal, after procuring from the surety, delivers to
the obligee.
Bonds are classified under two main
classifications:
1.
Fidelity Bond – guarantees the honesty of
individual/s (usually employee/s) and assumes the payment of
any loss which an employer may suffer due to the dishonesty of a bonded individual
2.
Surety Bond – all other bonds not falling under the
definition of Fidelity Bond
Surety Bonds may be further subdivided
into:
1.
Non-judicial bonds – those required by parties to a
contract and by government rules and regulations having the force of law. Examples: Construct Contract Bonds, Supply Contract Bond,
Completion Bond, Credit Guarantee Payment Bond, Financial Guarantee Bond, etc.
2.
Judicial bonds ------- those required by laws to be
filed by the parties in court
proceedings. Examples: Administrator’s Bond,
Appeal
Bond, Attachment Bond, Guardian’s Bond, Injunction
Bond, Receiver’s Bond, etc
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