A surety bond is a type of contract that is made to make sure that the person purchasing the bond fulfills whatever is required of him in the contract. If the person purchasing the bond does not perform as expected, the person protected by the bond receives a financial reimbursement from the company issuing the bond. So basically, there are three parties involved in this type of contract and they are the company or person issuing the bond (surety), the person who is being protected by the bond (obligee) and the person who purchases the bond (principal).
The principal benefits from a surety bond in many different ways. One benefit is that clients are more willing to trust and transact with a bonded professional. There are even those who are only willing to work with bonded professionals. It will be advantageous for a principal if he uses this as marketing tool. He can purchase a surety bond and advertise himself as a bonded professional.
Another benefit that the principal gets from this type of contact is that he needs not put up any actual money in order to guarantee the obligee of his products and/or services. The principal only pays a percentage of the total when he purchases a surety bond which varies, depending on the company that issues the bond.
You must remember, though, that a surety bond does not let the principal escape from his responsibility by avoiding obligations to pay claims. The contract is not at all a form of insurance. The contract simply guarantees the obligee that you will pay the expected money and that you will give them another form of recourse if you are not able to fulfill it.
Obligees benefit the most from surety bonds because they have for themselves a form of protection. In many business deals or transactions, there are those parties that are unable to perform according to what is expected of them. They are either not able to deliver the product or are not able to perform the anticipated service. A surety bond ensures that if the principal falls short of the specifications of your deal, you as an obligee may pursue a claim against him.
The principal benefits from a surety bond in many different ways. One benefit is that clients are more willing to trust and transact with a bonded professional. There are even those who are only willing to work with bonded professionals. It will be advantageous for a principal if he uses this as marketing tool. He can purchase a surety bond and advertise himself as a bonded professional.
Another benefit that the principal gets from this type of contact is that he needs not put up any actual money in order to guarantee the obligee of his products and/or services. The principal only pays a percentage of the total when he purchases a surety bond which varies, depending on the company that issues the bond.
You must remember, though, that a surety bond does not let the principal escape from his responsibility by avoiding obligations to pay claims. The contract is not at all a form of insurance. The contract simply guarantees the obligee that you will pay the expected money and that you will give them another form of recourse if you are not able to fulfill it.
Obligees benefit the most from surety bonds because they have for themselves a form of protection. In many business deals or transactions, there are those parties that are unable to perform according to what is expected of them. They are either not able to deliver the product or are not able to perform the anticipated service. A surety bond ensures that if the principal falls short of the specifications of your deal, you as an obligee may pursue a claim against him.
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