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Who needs it
Surety bonds are typically required for businesses or individuals who want to bid on or perform certain types of contracts or services.
Some examples:
- Construction contractors: General contractors, subcontractors, and specialty contractors may need surety bonds to bid on and perform construction projects for government entities or private organizations
- Transportation companies: Long haul & cross-border transportation companies hauling goods for others across Canada and the USA
- Freight brokers: Freight brokers who arrange for the transportation of goods may need surety bonds to demonstrate their financial responsibility and ensure that they meet their contractual obligations. importers and exporters: Companies that import or export goods may need surety bonds to ensure that they comply with customs regulations and pay any duties or taxes owed.
- Notaries: Notaries public may need surety bonds to protect against errors or omissions in the performance of their duties.
What's Covered
A surety bond is a type of financial guarantee that is used to ensure that a party meets its contractual obligations. The coverage provided by a surety bond depends on the type of bond and the terms of the contract.
- Bid bond: This type of bond is used to ensure that a bidder on a construction project enters into the contract and provides the required performance and payment bonds if awarded the contract. If the bidder fails to do so, the surety may be required to pay the obligee a predetermined amount, typically a percentage of the bid price.
- Performance bond: This type of bond is used to ensure that a contractor completes a construction project according to the contract specifications. If the contractor fails to perform the work as agreed, the surety may be required to pay the obligee (the entity requiring the bond) to complete the work or compensate the obligee for any damages incurred.
- Highway carrier bond: This type of bond is used by a transportation company that carries goods on public highways and has obtained a surety bond as part of its regulatory compliance. The bond provides financial protection to the carrier’s customers in case the carrier fails to meet its contractual obligations or damages the goods it is transporting.
- Payment bond: This type of bond is used to ensure that a contractor pays its subcontractors, suppliers, and other parties involved in the construction project. If the contractor fails to pay these parties, the surety may be required to pay them on behalf of the contractor.
- License and permit bond: This type of bond is used to ensure that a business or individual complies with applicable laws and regulations related to its licensed activities. If the business or individual violates these laws or regulations, the surety may be required to pay damages to those harmed by the violation.
- Court bond: This type of bond is used to guarantee payment of a judgment or other court-ordered obligation. If the party required to pay fails to do so, the surety may be required to pay the obligation on behalf of the party.
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