CAIB 3 FINAL EXAM PAPER 2026
QUESTIONS WITH VERIFIED SOLUTIONS
GRADED A+
⩥ Identify the benefit of suretyship for the principal and the Obligee.
Answer: Principal - added confidence gained from the fact that the
surety is satisfied in their ability to carry out the required task
Obligee - such guarantees provide them with the confidence needed to
undertake various projects
⩥ Identify and define the three parties to any surety agreement. Answer:
Principal - the person primarily liable
Obligee - the party to whom someone else is obligated under a contract
Surety - one who undertakes to pay money or to do any other act in the
event the principal fails therein
⩥ Identify the three important characteristics of the guarantee made by
the surety to the obligee with respect to the principal. Answer: 1. Is a
promise made to the Obligee and not to the principal
2. Is a secondary obligation arising only on the default of the principal
3. Surety's duty to pay arises immediately upon the default of the
principal
,⩥ Identify two methods available to the surety to collect amounts owed
to it by the principal. Answer: 1. Assignment to surety of Obligees rights
2. Right of subrogation
⩥ In addition to being a three party contract and the principal liable to
the surety, identify six other characteristics of surety bond. Answer: 1.
No losses expected
2. Of indeterminate length and non-cancellable
3. Statutory or non-statutory in form
4. Bond limit (penalty)
5. Bond premium
6. Written contract
⩥ Explain the characteristic - No losses expected. Answer: Surety is
based on the extension of credit without risk. Theoretically, the surety
expects no losses to occur.
⩥ Explain the characteristic - Bond limit (penalty). Answer: Reflect the
amount of credit given to the principal by the surety. This limit
represents the amount of the penalty which the surety is prepared to pay
in the event the principal should default
⩥ Explain the characteristic - Bond Premium. Answer: The sum charged
for pre-qualification and other company expenses. Described as a
service fee rather than a premium
, ⩥ Identify the four categories of surety bonds used to address the
different obligations of principals. Answer: 1. Contract bonds
2. Judicial bonds
3. License and permit bonds
4. Miscellaneous bonds
⩥ Identify the interest or purpose of contract bonds. Answer: Guarantee
the fulfillment of certain obligations required under public and private
contracts
⩥ Identify the purpose of a supply bond. Answer: Involves an agreement
to furnish and deliver materials or supplies to an agreed price
⩥ Other than the supply bond, identify the four most common types of
contract bonds used in the construction industry. Answer: 1. Bid bonds
2. Performance bond
3. Labor and material payment
4. Maintenance bond
⩥ Identify three groups who may design their own bond wordings.
Answer: 1. Hydro and oil companies
2. Crown Corporations
3. Municipalities
QUESTIONS WITH VERIFIED SOLUTIONS
GRADED A+
⩥ Identify the benefit of suretyship for the principal and the Obligee.
Answer: Principal - added confidence gained from the fact that the
surety is satisfied in their ability to carry out the required task
Obligee - such guarantees provide them with the confidence needed to
undertake various projects
⩥ Identify and define the three parties to any surety agreement. Answer:
Principal - the person primarily liable
Obligee - the party to whom someone else is obligated under a contract
Surety - one who undertakes to pay money or to do any other act in the
event the principal fails therein
⩥ Identify the three important characteristics of the guarantee made by
the surety to the obligee with respect to the principal. Answer: 1. Is a
promise made to the Obligee and not to the principal
2. Is a secondary obligation arising only on the default of the principal
3. Surety's duty to pay arises immediately upon the default of the
principal
,⩥ Identify two methods available to the surety to collect amounts owed
to it by the principal. Answer: 1. Assignment to surety of Obligees rights
2. Right of subrogation
⩥ In addition to being a three party contract and the principal liable to
the surety, identify six other characteristics of surety bond. Answer: 1.
No losses expected
2. Of indeterminate length and non-cancellable
3. Statutory or non-statutory in form
4. Bond limit (penalty)
5. Bond premium
6. Written contract
⩥ Explain the characteristic - No losses expected. Answer: Surety is
based on the extension of credit without risk. Theoretically, the surety
expects no losses to occur.
⩥ Explain the characteristic - Bond limit (penalty). Answer: Reflect the
amount of credit given to the principal by the surety. This limit
represents the amount of the penalty which the surety is prepared to pay
in the event the principal should default
⩥ Explain the characteristic - Bond Premium. Answer: The sum charged
for pre-qualification and other company expenses. Described as a
service fee rather than a premium
, ⩥ Identify the four categories of surety bonds used to address the
different obligations of principals. Answer: 1. Contract bonds
2. Judicial bonds
3. License and permit bonds
4. Miscellaneous bonds
⩥ Identify the interest or purpose of contract bonds. Answer: Guarantee
the fulfillment of certain obligations required under public and private
contracts
⩥ Identify the purpose of a supply bond. Answer: Involves an agreement
to furnish and deliver materials or supplies to an agreed price
⩥ Other than the supply bond, identify the four most common types of
contract bonds used in the construction industry. Answer: 1. Bid bonds
2. Performance bond
3. Labor and material payment
4. Maintenance bond
⩥ Identify three groups who may design their own bond wordings.
Answer: 1. Hydro and oil companies
2. Crown Corporations
3. Municipalities
