Agent
One who solicits, negotiates or sells surety bonds on behalf of a surety company. Top

Agreement
An arrangement between the parties regarding a method of action.

Applications
A form used to collect information to underwrite a risk.

Bid
(1) An offer or proposal of a price (2) The amount offered or proposed. Top

Bid Bonds
Bonds which guarantee that a contractor will enter into a contract at the amount bid and post the appropriate performance bonds. These bonds are used by owners to pre-qualify contractors submitting proposals on contracts. These bonds provide financial assurance that the bid has been submitted in good faith and that the contractor will enter into a contract at the price bid.

Bonding Company
A properly licensed firm or corporation willing to execute a surety bond, or bonds, payable to the owner, securing the performance on a contract either in whole or in part; or securing payment for labor and materials.

Bid Form
A standard written form furnished to all bidders for the purpose of obtaining the requested information and required signatures from the authorized bidding representatives.

Contract
(1) An agreement between two or more parties, especially one that is written and enforceable by law (2) The writing or document containing such an agreement. Top

Contract Bonds
A type of bond designed to guarantee the performance of obligations under a contract. These bonds guarantee the obligee that the principal will perform according to the terms of a written contract. Construction contracts constitute most of these bonds. Contract bonds protect a project owner by guaranteeing a contractor's performance and payment for labor and materials. Because the contractor must meet the surety company's pre-qualification standards, construction lenders are also indirectly assured that the project will proceed in accordance with the terms of the contract.

Fidelity Bonds
Bonds designed to guarantee honesty. Generally, the bond guarantees honesty of employees. These bonds cover losses arising from employee dishonesty and indemnify the principal for losses caused by the dishonest actions of its employees. Top

Indemnity Agreement
Is a written undertaking whereby the contractor agrees to reimburse the bonding company, which issued the bond, if they have to pay because the contractor defaulted on the contract. Top

Indemnity Bond
Commonly another name for the bond. Bonds provide a form of indemnification of loss to the Obligee. The bond will provide compensation in case of a loss. The surety bond will respond up to the limits of liability (the bond penalty), but it will pay no more than the amount of the obligee's actual loss unless the bond is a forfeiture bond.

Letter of Credit
There are many types of letters of credit. The type used to guarantee a contractor's performance is a "standby" letter of credit in which a bank stands ready to pay over the amount of the letter to the owner of the project (obligee) in the event of default. A letter of credit differs significantly from a surety bond and one is not a substitute for the other. The Miller Act which applies to federal construction recognizes this fact and does not permit the use of a letter of credit to guarantee performance of such contracts. Top

License and Permit Bonds
A term used to refer to bonds, which are required to obtain a license or a permit in any city, county, or state. These bonds guarantee whatever the underlying statute, state law, municipal ordinance, or regulation requires. They may be required for a number of reasons, for example the payment of certain taxes and fees and providing consumer protection as a condition to granting licenses related to selling real estate or motor vehicles and contracting services.

Miscellaneous Bonds
A term used to refer to bonds which do not fit any of the other well-recognized categories of surety bonds. Top

Obligee
Broadly, anyone in whose favor an obligation runs. Frequently used in surety bonds, this refers to the person, firm or corporation protected by the bond. Top

Obligor
Commonly called "principal," one bound by an obligation. Under a bond, strictly speaking, both the principal and the surety are obligers.

Payment Bonds
Payment bonds guarantee payment of the contractor's obligation under the contract for subcontractors, laborers, and materials suppliers associated with the project. Since liens may not be placed on public jobs, the payment bond may be the only protection for those supplying labor or materials to a public job. Top

Performance Bond
(1) A written form of security from a surety (bonding) company to the owner, on behalf of an acceptable prime or main contractor or subcontractor, guaranteeing payment to the owner in the event the contractor fails to perform all labor, materials, equipment, or services in accordance with the contract. (2) The surety companies generally reserve the right to have the original prime or subcontractor remedy any claims before paying on the bond or hiring other contractors. (see Labor and Material Payment Bond and Surety Bond)

Pre-qualification
A rigorous review performed by the surety to certify that a contractor is capable of performing the work in accordance with the terms and conditions of the contract.

Surety
A person or institution which guarantees the acts of another. Top

Surety Agencies
Insurance agencies and brokerage firms that arrange corporate surety bonding and insurance for contractors.

Surety Bonds
Surety bonds are three-party agreements in which the issuer of the bond (the surety) joins with the second party (the principal) in guaranteeing to a third party (the obligee) the fulfillment of an obligation on the part of the principal. An obligee is the party (person, corporation or government agency) to whom a bond is given. The obligee is also the party protected by the bond against loss.

Surety Underwriter
An employee of the surety company who evaluates applications for surety bonds and determines the terms under which the applicant will be bonded.

Work-On-Hand Reports
A type of financial statements or schedule which lists a contractor's jobs in progress. Top