Dispelling the Bond Myth
We often receive calls from clients who were notified that they are required to obtain a Bond (for various reasons) and don’t have a clue as to how they meet this requirement. If you have ever been in that situation, don’t feel like you are alone…
Working your way through this process is not as difficult as it may seem. First, you need to understand what a Bond is. A Bond is a financial guarantee, usually issued by an insurance carrier. In this transaction, there are usually 3 entities involved.
The party making the requirement for the Bond is known as the Obligee. This party needs confirmation that an action or service will be carried out according to the written contract.
You (or your business) are known as the Principal. Some entity is requiring you/your business to guarantee that an action or service will be performed according to contract.
The insurance carrier is known as the Surety. They are guaranteeing that what was agreed upon will be carried out. If the Principal is unable to perform the action/service, the Surety guarantees that performance.
So, the Surety’s job is to protect the Obligee in the event that the Principal does not perform as required.
That’s about as simply as it gets.
There are many forms of Bonding/Bond requirements. Most people who handle an estate for a deceased person or serve as a guardian for a minor child or an incompetent person would be required to obtain a bond guaranteeing that the assets of the estate are handled properly.
The City of Fayetteville has begun requiring Landscape companies to post a bond guaranteeing their work.
Sub-contractors providing specific skills (painters, framers, roofers, electricians, plumbers, etc) for larger projects are often required to provide a performance bond proving that the contracted work will be completed as agreed.
As you can imagine, any Surety (insurance carrier) providing this guarantee wants to know that the Principal (you) is able to perform as agreed. So, the Surety will require the Principal to provide certain financial documentation that confirms the Principal’s financial status.
We are available to assist you with your bond needs or to simply answer questions that you might have regarding bonds.
Our close relationship with local attorneys skilled in Estates, 50+ years of experience with bonding and our close proximity to the Cumberland County Courthouse has proven to be a winning combination.
Please contact us for additional information or a bond quote at www.callahanrice.com.