What Are Surety Bonds?
Surety bonds are basically a promise between parties, wherein one party (the Principal) promises to pay another party (the Obligee) a certain amount of money, if the Principal fails to meet some obligation arising out of the terms of the contract. The surety bond is designed to protect an Obligee from losses arising out of the Principal’s failure to perform a task or meet an obligation.
There are three parties in the contract for a typical surety bond, they are:
- The Obligee: Recipient of the Bond or Promise
- The Principal: The party which is expected to perform the contractual obligation
- The Surety: The party which assures the Obligee that the principal can perform the said task
Surety Bonds in Maryland- An Overview
The state of Maryland has laws for different kind of businesses, where Surety bonds are required. The Government protects its consumers from fraudulent practices of the businesses by making it necessary for the businesses to secure Surety bonds.
Typically when a business enters into a contract with the state government to provide services, the government requires a Surety to stand as a guarantor, ensuring that the services are completed and all the stipulations are followed by the Principal. In case the Principal fails to deliver as per the contractual terms, then the state government can ask the Surety or guarantor to pay the Bond’s full amount.
Surety Bonds in Maryland are required by industries as part of their legal licensing procedures. But Surety Bonds are not only for individuals and businesses to perform services for the state government. Business owners purchase surety bonds for extra protection against actions such as employee theft. These bonds are designed to protect businesses and their customers.
A customer would enter confidently into a contract with a business establishment, which has a surety bond in place. Surety Bonds are perceived as ethical instruments by customers, and are thus valued by businesses.
Securing surety bonds in Maryland is fairly easy. Many bond specialists can be found online who can guide a person to buy a Surety bond as per the needs of the individual. Online applications can be filled and one can secure a quote in a few days.