Surety bonds are financial contracts that ensure that obligations will be met between a number of parties. These include the principal, the oblige and the surety. With each of these parties, the surety bond will be used to meet several objectives and purposes. These vary and can be used for enforcing contracts, business services, court bonds and licenses and permits. The bonds are issued by banks and other financial institutions. When looking to get surety bonds scottsdale az, it will be important to consider a few things so that you know what to expect when getting a bond. It will be important to know the terms, the duration of the bond and how to enforce the bond if you are the issuer.
What Is a Surety Bond
A surety bond is a legally binding contract that is used to make sure that certain obligations are met between three different parties. The principal is the individual who need the actual bond. A principal can be anyone from an individual, to a company or a government entity. The next part of a surety bond is the obligee which is the person or entity that requires the bond. An obligee can be a government institution or a company. As the third and final part of the bond, the surety is the insurance company that makes sure that the principal is able to meet the stated obligations and terms of the bond.
How Does It Work
With surety bonds, there will be a form of insurance to the obligee. This will ensure that they are the beneficiary of the bond in case the principal is not able to meet the stated obligations. The bond is also a form of credit to the party that is seeking the bond. Therefore, they must pay back the entire amount of the bond including legal costs. When getting a surety bond, the principal is legally obligated to follow the terms of the bond or else claims will be made.
Obtaining a Bond
Once a principal decides to get a surety bond, they will then need to focus on obtaining it. The first thing they will need to do is determine the specific type of bond that they need. Each bond has many different requirements and so the principal will need to find out about them before getting it. Getting the correct bond is very important as the oblige will likely reject it if the principal gets the wrong one. Surety bonds can be for a specific contract such as a contractor bond which is a job that is over $100,000. Any bond that is not a contractor bond will be either a license bond, court bond or a fidelity bond. The requirements for getting these surety bonds will vary.
What the Bond Guarantees
Any surety bond that is obtained will have certain guarantees. This will vary depending on each type of bond. For instance, a contractor bond will guarantee that a certain job is completed. Other bonds such as auto dealer and contractor bonds will give these entities the authorization to conduct business in their field. There are also license bonds which guarantee professionals and organizations to operate in a given jurisdiction.