A surety bond or surety is the promise by a guarantor or guarantor to pay a certain party ( obligee ) a certain amount if the second party () failed to meet some obligations, such as meeting the terms of the contract. The guarantor's obligation protects the obligee from the loss caused by the failure of the principal to meet its obligations.
Video Surety bond
Ikhtisar
Collateral bonds are defined as contracts between at least three parties:
- the obligee : the party receiving the obligation
- the principal : the main party to be contractual obligations
- guarantor : which assures the obligee that the principal can do its job
European securities bonds can be issued by banks and surety companies. If issued by the bank they are called "Bank Guarantee" in English and Caution in French, if issued by their surety company called surety/bonds. They pay cash up to the limit of collateral in the event of a Principal's failure to uphold its obligations to the Obligee, without reference by the Obligee to the Principal and to the only Obligee verified claim statement to the bank.
Through bond guarantees, the guarantor agrees to enforce - for the benefit of the obligee - the contractual obligation (obligation) made by the principal if the principal fails to uphold the promises to the Obligee. This contract is established so as to encourage the obligee to contract with the principal, ie to demonstrate the principal's credibility and ensure the performance and settlement in accordance with the terms of the agreement.
The principal will pay a premium (usually every year) in return for the financial strength of the bonding company to extend the credit guarantee. In the event of a claim, the surety shall investigate. If it turns out to be a valid claim, the guarantor will pay and then move on to the principal for reimbursement of the amount paid on any claims and any legal fees incurred. In some cases, the principal has a cause of action against the other party for a major loss, and the guarantor will have the subrogation right "get into the shoes" of the principal and recover damages to reimburse the principal.
If the main default and the guarantor turns bankrupt, the purpose of the bond becomes nugatory. As such, guarantees on bonds are usually insurance companies whose solvency is verified by private audits, government regulations, or both.
The key term in almost every surety bond is criminal amount . This is a certain amount of money which is the maximum amount to be paid by the guarantor in the event of a principal's failure. This allows the guarantor to assess the risks involved in issuing bonds; the charged premium is determined accordingly.
The bond guarantee also occurs in other situations, for example, to ensure the proper implementation of fiduciary duties by persons in positions of personal or public belief.
Industry of the United States
In 2009, the US annual bond guarantee amounted to about $ 3.5 billion. The state insurance commissioners are responsible for regulating the activities of corporate guarantor in their jurisdictions. The Commissioner also licenses and regulates brokers or agents who sell bonds. This is known as a manufacturer; in the United States, the National Association of Surety Bond Producers (NASBP) is the trade association representing this group.
In 2008, the New York Times wrote "post warranties for people charged with crimes in exchange for fees, unknown worldwide".
Maps Surety bond
History
Individual guarantee bonds represent the original form of suretyship. The earliest known records of suretyship contracts are the Mesopotamian tablets written around 2750 BC. The evidence of individual guarantor bonds is in the Code of Hammurabi and in Babylon, Persia, Assyria, Rome, Carthage, between ancient Hebrews and (later) in England.
The Code of Hammurabi, written around 1790 BC, gives the earliest surviving mention of the surviving in written code of law.
Suretyship is not always accomplished through bond execution. Frankpledge, for example, is a combined suretyship system prevalent in the Middle Ages of England that does not rely on bond execution.
The first Corporate Surety, the Guarantee Society of London, dates from 1840.
In 1865, the Fidelity Insurance Company became the first US Corporate Guarantee Corporation, but the effort soon failed.
In 1894 the congress passed the Hearing Act requiring bond guarantees on all federally funded projects. In 1908 The Surety Association of America, now The Surety & amp; The Fidelity Association of America (SFAA) was established to regulate industry, promote public understanding and trust in the guarantor industry, and to provide a forum for discussion on issues of common interest to its members. SFAA is a licensed rating or advisory organization in all states and is defined by the state insurance department as a statistical agent for loyalty reporting and assurance of experience. SFAA is a trade association composed of companies that collectively write most of the bonds and loyalty obligations in the United States. Then in 1935, the Miller Act was passed in place of the Hearing Act. The Miller Act is the current federal law that requires the use of bond guarantees on federally funded projects.
Surety bond contract
A bond contract, widely used in the construction industry by a general contractor as part of construction law, is a guarantee from the Guarantor to the project owner (Obligee) that the general contractor (Principal) will comply with the terms of the contract. The Associated General Contractors of America, the United States trade association, provides some information to their members on this bond. Bond contracts are not the same as contractor license contracts, which may be required as part of the license.
Included in this category are offer bonds (ensuring that contractors will enter into contracts when receiving offers); performance bonds (ensuring that the contractor will perform the work as determined by the contract); (guaranteeing that the contractor will pay for services, especially subcontractors and materials and especially for federal projects where mechanical lien is not available); and maintenance bonds (ensuring that the contractor will provide facility and maintenance repairs for a specified period). There are also diverse contractual bonds that do not fall within the above categories, the most common being subdivisions and bond supplies. Bonds are usually required for federal government projects by Miller Law and state projects under the "Little Miller Story". In the federal government, the language of the contract is determined by the government. In private contracts the parties may freely contract the language and requirements. The standardized forms contract provided by the American Institute of Architects (AIA) and Associated General Contractors of America (AGC) make an optional bond. If the parties agree to require a bond, additional forms such as AIA Document 311 performance bond contracts provide general terms.
Losses arise when contractors do not complete their contracts, which often arise when contractors get out of business. Contractors are often out of business; for example, a study by BizMiner found that of 853,372 contracts in the United States in 2002, 28.5% were out of business in 2004. The average failure rate of contractors in the United States from 1989 to 2002 was 14 percent compared to 12 for other industries.
The price is as a percent of the total penalty (the maximum that the collateral is responsible for) ranging from about one percent to five percent, with most contracts worth the least paying credit. This tie usually includes an indemnity agreement where the main contractor or other party agrees to indemnify the surety if there is a loss. In the United States, the Small Business Administration can guarantee bond guarantees; in 2013 eligible contracts tripled to $ 6.5 million.
Commercial warranty
Commercial bonds represent various types of bonds that are not in accordance with the contract classification. They are generally divided into four sub-types: licenses and permissions, courts, public officials, and various.
Licensing and bonding permissions
Bond licenses and licenses are required by certain federal, state, or municipal governments as a prerequisite for accepting licenses or permits to engage in specific business activities. The bonds serve as guarantees from the Guarantor to the government and its constituents (Obligee) that the company (Principal) will comply with the constitution, state laws, city regulations, or regulations.
Specific examples include:
- Contractor license contracts, which ensure that contractors (such as plumbers, electricians, or general contractors) comply with laws relating to their field. In the United States, bonding requirements may be at the federal, state or local level.
- Customs bonds, including importer entry obligations, which ensure compliance with all relevant laws, as well as payment of import duties and taxes.
- The tax bond, which ensures that the business owner will comply with laws relating to remittance or other taxes.
- Reclamation Bonds and Environmental Protection
- Broker Bonds, including Insurance, Mortgages, and Ownership Bonds bonds
- ERISA (Employees' Retirement Insurance)
- Motor vehicle dealership
- Cargo broker ties
- Bonds of money transfers
- Health spa bills, which ensure that health spas will comply with local laws related to their fields, as well as refund of payments for all prepaid services if the spa is closed.
Court bond
Bond court is a bond that is determined by law and relates to the court. They are further broken down into judicial and fiduciary bonds. A judicial bond arises from litigation and is posted by the party seeking a court settlement or defending against legal action seeking a court settlement. Fiduciary Guarantees, or wills, shall be brought before the courts of ratification of judges and courts that apply fair jurisdiction; they ensure that persons who have been trusted by such courts to take care of another's property will carry out a faithfully determined task.
Examples of judicial bonds include appeal bonds, supersedea bonds, attachment bonds, replevin bonds, command bonds, bonds lien Mechanic, and bond bonds. Examples of fiduciary bonds include administrator bonds, guardians, and trustees.
Official public bond
Official public bonds ensure the honesty and loyal performance of those who are elected or appointed to public trust positions. Examples of officials who sometimes require bonds include: public notary, treasurer, commissioner, judge, city clerk, law enforcement officers, and Credit Union volunteers.
Miscellaneous bonds
Other bonds are bonds that do not comply with the classification of other commercial surety bonds. They often support personal relationships and unique business needs. Examples of significant various bonds include: lost securities, hazardous waste disposal, credit enhancement bonds, self-guaranteed workers' compensation insurance bonds, and wage and welfare/benefits bonds (Unions).
Business services bonds
A business service bond is a bond guarantee that seeks to protect the entity-bound client from theft. This bond is common for home health care, cleaning services, and other companies that regularly enter their home or business. While these bonds are often confused with loyalty ties, they are much different. The business service bond allows the entity clients to be bound to claim a guaranteed bond when the client property has been stolen by a bound entity. However, claims apply only if the employee of a bound entity is convicted of a crime in court. In addition, if a surety company pays a claim on a bond, they will seek to be reimbursed by a bound entity for all costs and expenses incurred as a result of such claim. This is different from the traditional loyalty bond in which the insured (bonded entity) will be liable to pay deductible only in the case of closed claims to the extent of the policy.
Negligence
Penalty bonding is another type of bond that has historically been used to guarantee contract performance. They must be distinguished from surety bonds because they do not need parties to act as guarantor - having sufficient obliges and obligors. One type of historically significant criminal bond, a criminal bond with conditional removal, bond printing (obligation to pay) on the front of the document and conditions that would cancel the pledge to pay (referred to as indenture of defeasance - essentially, contractual obligations) behind the document. Penalties, though an artifact of historical importance, were not used in the early nineteenth century in the United States.
Electronic warranty
In certain situations, Electronic Surety Bond (ESB) can be used instead of traditional surety paper guarantees. In 2016, the National Multinational Licensing Systems and Registry (NMLS) initiated systems for ESB publishing, tracking and maintenance to support multiple managed licenses through NMLS. This new online system speeds up bond issuance and reduces documents, among other potential benefits.
Timeline
The NMLS ESB initiative began on January 25, 2016 when company surety and bond provider can start account creation process. The second phase begins on September 12, 2016 when the initial group of nine state regulatory agencies began accepting ESB for certain licensing types. These early launches included agencies in Idaho, Indiana, Iowa, Massachusetts, Texas, Vermont, Washington, Wisconsin, and Wyoming.
On January 23, 2017, another group of twelve state agencies were added to allow ESB capabilities for certain licensing types. This group includes agencies in Alaska, Georgia, Illinois, Indiana, Louisiana, Minnesota, Mississippi, Montana, North Carolina, North Dakota, Rhode Island and South Dakota. A small increase is also completed by early 2017. Types of licenses that switch to ESB and implementation schedules vary by licensing agent. NMLS plans to launch additional state agencies and update the system with additional functionality over time.
See also
- Surety
- Signed
- Request warranty
- Fidelity ties
- Fiduciary
- Indemnification
- Insurance
- Penal Connection
- Performance bond
- Submittals (constructs)
- Shop image
- Testator
References
External links
- Surety Bonds at Curlie (based on DMOZ)
Source of the article : Wikipedia
0 Comments