AFSB 151 1: Principles of Suretyship
3 remedies for defaulting principal - ANS-indemnification
exoneration
subrogation
\A financial guarantee differs from performance and fidelity guarantees because it
requires honesty, the ability to perform the contract, and - ANS-. The ability to pay
money to meet the contractual obligation.
\A surety bond is a written document in which one party guarantees a second party's
- ANS-Performance to a third party for the second party's failure to fulfill an
obligation.
\A surety choosing to write a risky bond typically insists that the principal post
adequate collateral in the form of - ANS-liquid asset
\A surety that is not satisfied with the principal's financial capacity, past experience,
and resources other than money will probably - ANS-Provide the bond subject to
additional considerations and bond requirements.
\Any promise to answer for another person's debts or defaults, including the promise
that a surety makes to the obligee under a bond, derives from which one of these? -
ANS-statutes of frauds
\beneficiary to labor and materials - ANS-subcontractors, laborers and material
suppliers
\beneficiary to public official - ANS-anyone injured by wrongful acts
\Bond Penalty (penal amount or penal sum) - ANS-The maximum amount the surety
is obligated to pay for under a surety bond.
\Certificate of Deposit - ANS-a certificate issued by a bank to a person depositing
money for a specified length of time
assigned to surety in the principals name
\claims practices - ANS-determination of the facts
evaluation of the facts
review of the law and application to the facts
documentation of all steps leading to decisions and actions regarding claims
\collateral - ANS-cash or near cash assets that a principal pledges to secure credit, a
loan or other obligation
\collateral agreement forms - ANS-a document that provides the conditions for
posting and eventually returning collateral to the principal
\collateral examples - ANS-Irrevocable Line of Credit
certificate of deposit
negotiable bonds or stock certificates
\collateral is an interest in - ANS-personal property
\commercial bonds - ANS-guarantee the performance of all obligations that do no
arise from contract
, \common law - ANS-developed out of court decisions and establish precedent
\common shared elements with insurance - ANS-assumption of risk by professional
risk taker
receipt of premium
protection against financial loss
contract defining the risk
\contract of indemnity - ANS-A contract in which the insurer agrees, in the event of a
covered loss, to pay an amount directly related to the amount of the loss
agrees to reimburse obligee for a loss suffered because of principals act or default
\contract surety bond - ANS-classification of bonds that guarantee the performance
of the bonded contractor
\Corporate Suretyship - ANS-need for more stable/permanent guarantees when
obligations became too large/complex
\Cosureties - ANS-Two or more sureties that execute the same bond obligation with
a principal.
\differences between surety and insurance - ANS-insurance-losses are anticipated
and pooled economic risk is transfered to insurer
surety expects no loss and protects third party rather than buyer of the bond.
principal is prequalified and economic risk rests with them
\equitable relief - ANS-A court-ordered remedy form used in cases in which the
plaintiff seeks an injunction or specific performance from the defendant instead of
monetary damages.
\execution of a bond - ANS-The establishment of the formal contract between the
surety, principal, and obligee that is offered to the principal.
\exoneration - ANS-The surety's right to require a principal to perform or post
collateral when a loss is imminent.
\Facultative Reinsurance - ANS-Reinsurance of individual loss exposures in which
the primary insurer chooses which loss exposures to submit to the reinsurer, and the
reinsurer can accept or reject any loss exposures submitted.
\fidelity - ANS-bonds that have historically guaranteed the honesty of employees but
have been replaces by employee honesty coverage
\fiduciary bonds - ANS-A classification of bonds that guarantee the faithful
performance of duties by persons appointed by a court to administer the property or
interests of others.
\Forfeiture bond - ANS-A classification of bonds that guarantee that the surety will
pay the entire bond penalty if the principal fails to complete the obligation
\If the bond applicant is a business entity, from what parties do corporate sureties
routinely require indemnity agreements? - ANS-Any persons who have major
financial interests in the entity
\In the surety bond three-party relationship, the party who is primarily responsible for
fulfilling the obligation and who typically has control of the obligation is the -
ANS-principal
3 remedies for defaulting principal - ANS-indemnification
exoneration
subrogation
\A financial guarantee differs from performance and fidelity guarantees because it
requires honesty, the ability to perform the contract, and - ANS-. The ability to pay
money to meet the contractual obligation.
\A surety bond is a written document in which one party guarantees a second party's
- ANS-Performance to a third party for the second party's failure to fulfill an
obligation.
\A surety choosing to write a risky bond typically insists that the principal post
adequate collateral in the form of - ANS-liquid asset
\A surety that is not satisfied with the principal's financial capacity, past experience,
and resources other than money will probably - ANS-Provide the bond subject to
additional considerations and bond requirements.
\Any promise to answer for another person's debts or defaults, including the promise
that a surety makes to the obligee under a bond, derives from which one of these? -
ANS-statutes of frauds
\beneficiary to labor and materials - ANS-subcontractors, laborers and material
suppliers
\beneficiary to public official - ANS-anyone injured by wrongful acts
\Bond Penalty (penal amount or penal sum) - ANS-The maximum amount the surety
is obligated to pay for under a surety bond.
\Certificate of Deposit - ANS-a certificate issued by a bank to a person depositing
money for a specified length of time
assigned to surety in the principals name
\claims practices - ANS-determination of the facts
evaluation of the facts
review of the law and application to the facts
documentation of all steps leading to decisions and actions regarding claims
\collateral - ANS-cash or near cash assets that a principal pledges to secure credit, a
loan or other obligation
\collateral agreement forms - ANS-a document that provides the conditions for
posting and eventually returning collateral to the principal
\collateral examples - ANS-Irrevocable Line of Credit
certificate of deposit
negotiable bonds or stock certificates
\collateral is an interest in - ANS-personal property
\commercial bonds - ANS-guarantee the performance of all obligations that do no
arise from contract
, \common law - ANS-developed out of court decisions and establish precedent
\common shared elements with insurance - ANS-assumption of risk by professional
risk taker
receipt of premium
protection against financial loss
contract defining the risk
\contract of indemnity - ANS-A contract in which the insurer agrees, in the event of a
covered loss, to pay an amount directly related to the amount of the loss
agrees to reimburse obligee for a loss suffered because of principals act or default
\contract surety bond - ANS-classification of bonds that guarantee the performance
of the bonded contractor
\Corporate Suretyship - ANS-need for more stable/permanent guarantees when
obligations became too large/complex
\Cosureties - ANS-Two or more sureties that execute the same bond obligation with
a principal.
\differences between surety and insurance - ANS-insurance-losses are anticipated
and pooled economic risk is transfered to insurer
surety expects no loss and protects third party rather than buyer of the bond.
principal is prequalified and economic risk rests with them
\equitable relief - ANS-A court-ordered remedy form used in cases in which the
plaintiff seeks an injunction or specific performance from the defendant instead of
monetary damages.
\execution of a bond - ANS-The establishment of the formal contract between the
surety, principal, and obligee that is offered to the principal.
\exoneration - ANS-The surety's right to require a principal to perform or post
collateral when a loss is imminent.
\Facultative Reinsurance - ANS-Reinsurance of individual loss exposures in which
the primary insurer chooses which loss exposures to submit to the reinsurer, and the
reinsurer can accept or reject any loss exposures submitted.
\fidelity - ANS-bonds that have historically guaranteed the honesty of employees but
have been replaces by employee honesty coverage
\fiduciary bonds - ANS-A classification of bonds that guarantee the faithful
performance of duties by persons appointed by a court to administer the property or
interests of others.
\Forfeiture bond - ANS-A classification of bonds that guarantee that the surety will
pay the entire bond penalty if the principal fails to complete the obligation
\If the bond applicant is a business entity, from what parties do corporate sureties
routinely require indemnity agreements? - ANS-Any persons who have major
financial interests in the entity
\In the surety bond three-party relationship, the party who is primarily responsible for
fulfilling the obligation and who typically has control of the obligation is the -
ANS-principal
