By Shervin Masters


A surety bond is referred to as surety in some cases. It is a promise from a guarantor, also called a surety, to an obligee to pay them a given amount in cases a second party does not fulfill certain terms. The terms are usually contractual and need to be fulfilled by a principal, the second party. Thus, sureties are simply a way of protecting obligees against losses they may suffer if a principal fails to honor terms of a contract.

In the US, people commonly post a fee so that an accused individual can be released from jail, prison or the custody of law enforcement officers. Although common in the United States, other countries in the world engage in this practice to a lesser extent. To find professionals in matters to do with surety bond companies in Los Angeles, one can visit any of the many offices in the place. There are many experts in this field who have offices in Los Angeles where they offer professional services to members of the public.

Simply put, a surety bond is a contract that involves three parties, that is, the principal, obligee and the surety. Obligee is the party or individual receiving the obligation while the principal is the party expected to carry out contractual obligations. The purpose of sureties is to assure the obligee that the principal will carry out the obligation they owe to them.

These bonds may be issued by banks, individuals, or surety companies. The term bank guaranties is used if the bonds are issued by a bank, and if they are issued by a surety company, they are referred to as sureties or simply as bonds. This contract is often formed in order to induce an obligee to contract with the principal as a show of credibility and guaranty of performance and completion of contracts.

The bank or company offering protection must be paid a premium by the principal before rendering services. In case the principal defaults, it is upon the bank to investigate the claims of breach of contract, often launched by an obligee. The investigation helps to determine if the claims are valid or not.

The obligee is often paid when the company/bank when it finds that the contract was indeed breached by principal. Certain factors determine how much is paid, but the sum may also be set at the onset of the contract. One factor that may determine the sum paid is how far the contract had been performed at the time it was breached.

After paying off the obligee, the bank/company turns to the principal for reimbursement of the total cost incurred in the transaction. The cost often includes any legal fees and other expenses incurred during the process of paying the obligee. If the principal has a cause of action against another party for the losses incurred, the bank/company steps in to recover the cost of the damages from the other party.

Insolvency of sureties sometimes occurs, which makes it problematic for obligees to collect the some owed to them. Insolvency of sureties often makes the bond nugatory. For that reason, sureties must be an insurance company that has passed insolvency tests imposed by the government or private audits.




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