A surety bond is a written agreement between a Surety Company and the Contractor, or Principal that helps protect the project owner, or Obligee, in the event the Contractor fails to successfully perform the contract. If the Contractor fails to perform, the Surety Company assists the Obligee in completing the contract. All Federal construction contracts greater than $150,000 require a surety bond as a condition of contract award. Very often, the Contractor must provide a “bid” bond in order to bid on a Federal contract. The bid bond tells the Project Owner that if the contract is awarded to the contractor, the contractor will be able to obtain a “performance” bond. There are generally two types of bonds, a bid bond when submitting a bid on a project, and a performance/payment, or final bond, that is required for contract award.
2. What is Fiduciary
A “fiduciary” is a person or entity appointed by a court to administrate the assets of a third party – a person or entity. A fiduciary may also be a ‘trustee’ appointed by a court.
The three (3) types of fiduciary bonds which have the primary purpose to ensure proper and legal administration of the third party’s assets.
- Probate bonds: fiduciary administration of deceased assets.
- Guardianship bonds: fiduciary administration of a minor or word’s assets
- Trustee bonds: ‘trustee’ administration of an individual or business’s assets
3. What are Court Bonds?
Court or Judicial bonds are a class of surety bonds, required for civil court procedures. These ‘court’ bonds may be grouped into ‘plaintiff’ (voluntary) and ‘defendant’ (compulsory).