Study 10 Flashcards
The relationship among the surety, the principal debtor, and the creditor.
suretyship
(1) One who guarantees the performance of the obligations of the principal to the obligee; one who assumes legal responsibility for the fulfilment of another’s debt or obligation and becomes liable if the other defaults. Can be an individual or a corporation, usually an insurance company, that guarantees the performance or faith of another. (2) The security given against loss or damage, or as a guarantee that an obligation will be met.
surety
A person or corporation under a fidelity or surety bond who is obligated to another party under the terms of the bond.
obligor
The individual or corporation whose performance is guaranteed in suretyship.
principal
(1) A formal offer to perform work or supply goods, services, or material for a stated price.
(2) An offer by a potential purchaser to pay a specific price for goods or property to be sold at an auction.
bid
A form of surety bond specific to construction that guarantees the performance of the builder, or principal, according to project specifications. The bond amount, or penal sum, is stated in terms of the cost to complete the project. If the principal fails to deliver upon the contract, the owner, or obligee, may sue the surety and the principal for the means to complete the project.
construction bond
A bond that guarantees that the successful bidder of a project will enter into the contract under the bidding terms.
bid bond
A bond guaranteeing that a contractor will do the work and do it in accordance with the specifications and plans of the contract. Secures owner against contractor’s failure to perform the contract.
performance bond
A contract bond guaranteeing the payment by the contractor of all bills for labour and material that are used in the construction of a project.
labour and material payment bond
A charge upon real or personal property as security for some debt or duty. Also, the security interest created by a mortgage. The conditions of an insurance policy require the disclosure to the insurer of any existing lien on the insured property.
lien
The loss of a right as a result of the non-performance of some obligation or condition.
forfeiture
A written contract entered into between indemnitor and surety in which the indemnitor secures surety against loss the surety may sustain as a result of having issued a bond for a third party (usually a company owed by the indemnitor) or for the indemnitor.
indemnity agreement
The remaining value of property after severe damage by fire or other peril. The overall loss is reduced by the salvage value. Undamaged property may be quite saleable, and some property may be only partially damaged, thus repairable and then saleable
salvage
