LawRato

Security Bond by a Surety



    What is Security Bond by a Surety?

    A surety bond is a contract between three parties—the principal (one executing the bond), the surety (guarantor) and the obligee (the entity requiring the bond)—in which the surety financially guarantees to an obligee that the principal will act in accordance with the terms established by the bond.

    Why is Security Bond by a Surety required?

    When you are required to get a surety bond, you are expected to abide by the terms of the bond. If you fail to do so, a bond claim is made. This can be a costly endeavor for a few reasons. When it comes to surety bond claims, you are expected to pay every expense of the claim, including legal costs.

    The surety providing your bond is saying you are in a strong enough financial position to cover any claims that may arise. If the surety is wrong and payment cannot be collected from you directly or through the courts, they are ultimately responsible for the costs. For this reason, bonds are underwritten based on the potential of a principal causing a claim, as well as the ability of the principal to repay a claim in the future.

    What should a Security Bond by a Surety cover?

     

    A surety bond must contain the following:

    1. Name of the principal, surety and the obligee.

    2. Address of principal, surety and the obligee.

    3. The amount being lent/borrowed.

    4. The purpose for which the amount is being borrowed.

    5. The time period for which the amount is being lent.

    6. The interest to be levied on the amount.

    7. Condition of payment or the required obligation to be fulfilled by surety in case the obligee fails to do so.

    Documents Required for Security Bond by a Surety

    No specific documents are required in order to draft and execute a surety bond. However, ID proofs of the parties in order to confirm the names and permanent addresses of the principal, surety and the obligee must be scrutinized.

    Procedure for Security Bond by a Surety

    There is no specific procedure applicable in the making of the Surety bond. However, it is always recommended to consult a lawyer before drafting a surety bond with all the necessary details as stated above. Once the bond is drafted it should be thoroughly analyzed by the principal and should be executed as per the guidance received from the lawyer. The rules related to registration of the bond must also be followed while executing, as may be applicable as per the prevalent law.

    How can a lawyer help to draft Security Bond by a Surety?

    While drafting bonds, it is important to know as to what terminology should be used while drafting the same as a small ambiguity in the terms can also jeopardize the claim of the parties. This is why it is crucial to have a documentation lawyer to assist you with the drafting of the bond. Being an expert in the area of documentation law, a documentation lawyer knows the nitty-gritty of the legal procedures and the requirements involved in drafting a bond. With the experience attained in the field, he/she can guide you with the right advice while entering into a bond and can make sure that such mistakes are eliminated that cannot be resolved even through further legal procedures.

  • Disclaimer: The information contained in the sample document is general legal information and should not be construed as legal advice to be applied to any specific factual situation. Any use of the Site or document format DOES NOT create or constitute a solicitor-client relationship between LawRato or any employee of or other person associated with LawRato and a user of the Site. The information or use of documents on the Site is not a substitute for the advice of a lawyer.

Consult top rated Civil Lawyers in India


Popular Legal Documents


Similar Documents

ques Security Bond for grant of Succession Certificate
Free Legal Document - Banking / Finance

View Document

ques Bond to Secure the Performance of a Contract
Free Legal Document - Banking / Finance

View Document

ques Employee Bond for Non Compete
Free Legal Document - Banking / Finance

View Document