Chapter 5 – Surety Bonds Flashcards Preview

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Flashcards in Chapter 5 – Surety Bonds Deck (29):
1

Surety

the state of being sure, certain and secure

2

Suretyship

guarantee of performance, eliminate risk to the person whom the promise of performance is made

3

Fidelity Bonds

Protect the dishonest acts of employees

4

Surety Bonds

undertaking by one party (the surety) to become accountable to another party (the oblige) for the performance of an obligation or undertaking by
a third party (the principal).

5

Three C’s form the basis of credit appraisal

Character
Capacity
Capital

6

Benefits to the Principals (third party)

added confidence gained from the fact that the
surety is satisfied in their ability to carry out the required work

7

Benefits to the Obligee (accountable party)

such guarantees provide them with the confidence needed to undertake various projects

8

Principal

the person primarily liable

9

Obligee

the party to whom someone else is obligated under a contract

10

Surety

one who undertakes to pay money or to do an y other act in event that his (the) principal fails therein

11

Statutory Bonds

one that is required by a municipal ordinance, or federal or provincial regulation or statute.

12

Non-Statutory Bonds

not required by law but flow from the contract or
agreement between the parties

13

Bond Limit (Penalty)

the amount of credit given to the principal by the surety

14

Contract Bonds

guarantee the fulfillment of certain obligations required under public and private contracts

15

Bid Bond

Used in large projects, calling for tenders or bids from interested parties

16

Performance Bond

grantees the actual performance of the contract in accordance with its specified terms and conditions.

17

Labour & Material Payment Bond

Guarantees that the sub trades and suppliers will be paid for the work and materials that enter into the project.

18

Maintenance Bond

Separate maintenance bond is required if the
warranty period is beyond the standard one-year term

19

Working Capital

the amounts of funds available, this is determined by subtracting current liabilities from current assets

20

Net Worth

establishing the amount of money remaining after all assets have been liquidated and all liabilities cleared

21

Profitability

Analysis of working capital and net worth will reveal the profitability of the contractor, contractor will attempt to improve the picture by injecting other assets into the company.

22

Percentage of completion method

Preferred accounting method for work in progress, earning from the work completed are calculated as a percentage of the total contract price

23

Compliance Guarantees

basic grantee that principals will comply with those laws that affect them

24

Financial Guarantees

Grant the licence or permit against monetary damages resulting from the failure of licensees to comply with statutes, regulations, ordinances or codes which
control their activities.

25

Plaintiffs' and Defendants' Bonds

guarantees the defendant (obligee) that the plaintiff (principal) will pay any damages, including court costs

26

Attachment Bond

Guarantees that, if the court decides against the plaintiff, the defendant will be paid any damages as the result of having such property attached.

27

Release of Attachment Bond

Can be released to the defendant pending the final outcome of the court's decision

28

Injunction Bond

ensure that the defendant in an action performs or refrains from performing some act or function

29

Appeal Bond

Guarantees payment of all court costs on the appeal