Surety and General Bonds
- ANS-A bond is written for a set limit, sometimes called the penalty. If the principal's
obligation exceeds the limit, the surety will be liable only for the amount of the limit
\ - ANS-A litigation bond is a court bond guaranteeing that someone involved in a
court case gets money due after the case is decided
\ - ANS-Public officials bond is normally written for the term of office that the principal
is elected to serve
\ - ANS-The performance bond is a guarantee by the surety that if the principal
(contractor) does not perform as promised, the surety will pay the obligee any
losses. The surety will then attempt to make the principal repay the surety
The surety may NOT cancel the bond so as to avoid having to pay losses and
expenses
\A business owner needs to purchase additional inventory in order to meet a
customer's order. He contracts with a competitor, obtains the additional inventory,
and satisfies his customer. Unfortunately, he does not have the money to repay his
competitor. What type of guarantee should he have purchased? - ANS-Financial
*The financial guaranty will pay a certain amount of money if the business owner
(principal) fails to meet his contractual obligation with the competitor (obligee)
\A public official bond guarantees which of the following? - ANS-Elected officials will
perform their duties honestly
*Public officials may be held liable for misuse of public funds and damage to the
public may result if the official fails to fulfill obligations. Public official bonds, which
are often a condition of being eligible to hold public office, guaratee any damages to
the public will be paid
\Bob's neighbor will not stop parking his motorcycle in Bob's rose garden no matter
how many times he has been asked to quit parking there. Bob finally gets a court
order requiring the neighbor to refrain from parking there. It turns out it was his
neighbor's property all along. What bond was Bob required to post guaranteeing his
neighbor's damages in this wrongful action will be paid? - ANS-Injunction
*An injunction bond is a guarantee that if the injunction should not have been issued,
damages will be paid to the injured party
\Bonds for administrators and trustees are examples of - ANS-Fiduciary bonds
*Fiduciary bonds cover those in a position of trust
\Contract Bonds - ANS--Guarantee performance of written contract
-Primarily used in construction contracts
-Bid bonds - performance bond issued if contractor is awarded and accepts contract
-Completion bond - guarantees borrowed money will be used to fund construction
project
-Labor and material bond - guarantees work and fees are delivered free and clear of
liens or burdens
- ANS-A bond is written for a set limit, sometimes called the penalty. If the principal's
obligation exceeds the limit, the surety will be liable only for the amount of the limit
\ - ANS-A litigation bond is a court bond guaranteeing that someone involved in a
court case gets money due after the case is decided
\ - ANS-Public officials bond is normally written for the term of office that the principal
is elected to serve
\ - ANS-The performance bond is a guarantee by the surety that if the principal
(contractor) does not perform as promised, the surety will pay the obligee any
losses. The surety will then attempt to make the principal repay the surety
The surety may NOT cancel the bond so as to avoid having to pay losses and
expenses
\A business owner needs to purchase additional inventory in order to meet a
customer's order. He contracts with a competitor, obtains the additional inventory,
and satisfies his customer. Unfortunately, he does not have the money to repay his
competitor. What type of guarantee should he have purchased? - ANS-Financial
*The financial guaranty will pay a certain amount of money if the business owner
(principal) fails to meet his contractual obligation with the competitor (obligee)
\A public official bond guarantees which of the following? - ANS-Elected officials will
perform their duties honestly
*Public officials may be held liable for misuse of public funds and damage to the
public may result if the official fails to fulfill obligations. Public official bonds, which
are often a condition of being eligible to hold public office, guaratee any damages to
the public will be paid
\Bob's neighbor will not stop parking his motorcycle in Bob's rose garden no matter
how many times he has been asked to quit parking there. Bob finally gets a court
order requiring the neighbor to refrain from parking there. It turns out it was his
neighbor's property all along. What bond was Bob required to post guaranteeing his
neighbor's damages in this wrongful action will be paid? - ANS-Injunction
*An injunction bond is a guarantee that if the injunction should not have been issued,
damages will be paid to the injured party
\Bonds for administrators and trustees are examples of - ANS-Fiduciary bonds
*Fiduciary bonds cover those in a position of trust
\Contract Bonds - ANS--Guarantee performance of written contract
-Primarily used in construction contracts
-Bid bonds - performance bond issued if contractor is awarded and accepts contract
-Completion bond - guarantees borrowed money will be used to fund construction
project
-Labor and material bond - guarantees work and fees are delivered free and clear of
liens or burdens
