Chapter 5 – Surety Bonds Flashcards Preview

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

Surety

A

the state of being sure, certain and secure

2
Q

Suretyship

A

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

3
Q

Fidelity Bonds

A

Protect the dishonest acts of employees

4
Q

Surety Bonds

A

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
Q

Three C’s form the basis of credit appraisal

A

Character
Capacity
Capital

6
Q

Benefits to the Principals (third party)

A

added confidence gained from the fact that the

surety is satisfied in their ability to carry out the required work

7
Q

Benefits to the Obligee (accountable party)

A

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

8
Q

Principal

A

the person primarily liable

9
Q

Obligee

A

the party to whom someone else is obligated under a contract

10
Q

Surety

A

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

11
Q

Statutory Bonds

A

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

12
Q

Non-Statutory Bonds

A

not required by law but flow from the contract or

agreement between the parties

13
Q

Bond Limit (Penalty)

A

the amount of credit given to the principal by the surety

14
Q

Contract Bonds

A

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

15
Q

Bid Bond

A

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

16
Q

Performance Bond

A

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

17
Q

Labour & Material Payment Bond

A

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

18
Q

Maintenance Bond

A

Separate maintenance bond is required if the

warranty period is beyond the standard one-year term

19
Q

Working Capital

A

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

20
Q

Net Worth

A

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

21
Q

Profitability

A

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
Q

Percentage of completion method

A

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

23
Q

Compliance Guarantees

A

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

24
Q

Financial Guarantees

A

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
Q

Plaintiffs’ and Defendants’ Bonds

A

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

26
Q

Attachment Bond

A

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
Q

Release of Attachment Bond

A

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

28
Q

Injunction Bond

A

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

29
Q

Appeal Bond

A

Guarantees payment of all court costs on the appeal