- SURETYSHIP DEFINED
- MAIN CLASSIFICATION OF BONDS
- 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:
- 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
- Surety Bond – all other bonds not falling under the definition of Fidelity Bond
Surety Bonds may be further subdivided into:
- 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.
- 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