Flashcards in Chapter 5 – Surety Bonds Deck (29):
the state of being sure, certain and secure
guarantee of performance, eliminate risk to the person whom the promise of performance is made
Protect the dishonest acts of employees
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).
Three C’s form the basis of credit appraisal
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
Benefits to the Obligee (accountable party)
such guarantees provide them with the confidence needed to undertake various projects
the person primarily liable
the party to whom someone else is obligated under a contract
one who undertakes to pay money or to do an y other act in event that his (the) principal fails therein
one that is required by a municipal ordinance, or federal or provincial regulation or statute.
not required by law but flow from the contract or
agreement between the parties
Bond Limit (Penalty)
the amount of credit given to the principal by the surety
guarantee the fulfillment of certain obligations required under public and private contracts
Used in large projects, calling for tenders or bids from interested parties
grantees the actual performance of the contract in accordance with its specified terms and conditions.
Labour & Material Payment Bond
Guarantees that the sub trades and suppliers will be paid for the work and materials that enter into the project.
Separate maintenance bond is required if the
warranty period is beyond the standard one-year term
the amounts of funds available, this is determined by subtracting current liabilities from current assets
establishing the amount of money remaining after all assets have been liquidated and all liabilities cleared
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.
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
basic grantee that principals will comply with those laws that affect them
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.
Plaintiffs' and Defendants' Bonds
guarantees the defendant (obligee) that the plaintiff (principal) will pay any damages, including court costs
Guarantees that, if the court decides against the plaintiff, the defendant will be paid any damages as the result of having such property attached.
Release of Attachment Bond
Can be released to the defendant pending the final outcome of the court's decision
ensure that the defendant in an action performs or refrains from performing some act or function