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BONDING OR "SURETYSHIP" is the business of writing bonds for a qualified principal for a stipulated premium. It's origins reach back to biblical times where Genesis and Proverbs passages speak of "striking hands" for another (SEE:Genensis 43:9). It is interesting to note that suretyship is much older than Insurance, which originated in the seventeenth century.

A BOND IS A WRITTEN PROMISE MADE BY ONE PARTY TO BACK UP THE PROMISE OF ANOTHER.

The PRINCIPAL promises the OBLIGEE to faithfully perform a certain action, and the surety guarantees that it will be responsible if the principal defaults on his promise.

AN EXAMPLE OF A SITUATION REQUIRING A BOND WOULD BE AS FOLLOWS:

An individual, Dutiful Son, Jr. (PRINCIPAL) is appointed Personal Representative of his
father's estate. Mr. Son is obligated to carry out necessary actions in order to distribute the assets of the estate and is obligated to perform these duties according to law. The State
(OBLIGEE), requires that a bond be posted for an amount determined by the court, to protect interested persons and creditors.

OR

Joe Contractor (PRINCIPAL) enters into agreement with Harry Homeowner  (OBLIGEE) for the construction of an addition to his home. Joe Contractor is obligated to construct that addition, and if he failed to do so, he would be answerable to Harry Homeowner for any loss caused by his default. If Harry required Joe to provide a bond to guarantee the performance of his contract, and Joe Contractor did not perform his obligation or compensate Harry Homeowner for his loss, the the Surety would pay damages to Harry Homeowner for Joe Contractor's default and surogate against Joe Contractor to recover it's loss.

IN SUMMARY, SURETY SHIP IS A THREE PARTY CONTRACT BETWEEN THE PRINCIPAL, THE SURETY, AND THE OBLIGEE.

Surety ship is a three party contract between the principal, the surety, and the obligee. Surety
Bonds are concerned with the performance of a statutory duty.

FOLLOWING ARE SITUATIONS WHICH MAY REQUIRE A SURETY BOND:

Fiduciaries such as administrators of estates, executors, Trustees, guardians, etc. to guarantee that they will perform their duties according to law;

Licensees and permittees guaranteeing that they will abide by the laws regulating the business
in which they are engaging;

Contractors to support their bids or contracts with public bodies or private owners for constructing buildings, roads, bridges, etc.

Lost securities bonds making it possible for owners of lost or stolen securities, i.e. titles, deeds; to obtain duplicates.

Fidelity Bonds are those that indemnify employers against loss resulting from the dishonest
acts of their employees. Fidelity Bonds are needed by:

BANKS, SAVINGS AND LOAN ASSOCIATIONS, AND OTHER FINANCIAL INSTITUTIONS; 

COMMERCIAL ENTERPRISES OF ALL KINDS, MERCANTILE AND MANUFACTURING CONCERNS; 

CHURCHES AND OTHER RELIGIOUS ORGANIZATIONS AND SOCIETIES; 
FRATERNAL ORDERS, CLUBS, ASSOCIATIONS AND SOCIETIES OF ALL KINDS SUCH AS CHAMBERS OF COMMERCE, COMMUNITY CHEST, AMERICAN LEGION, BOY SCOUTS, ETC. 

ANY BUSINESS WHERE THE OWNER MUST NECESSARILY TRUST EMPLOYEES WITH MONEY, RECORDS, OR MERCHANDISE.