Surety Bonds Questions with Complete
Solutions
The Performance Bond guarantees that a task will be completed on time as per the instructions.
Watch out for the Completion Bond which should been called a "Lender's Bond." The
Completion Bond doesn't guarantee performance - it simply guarantees that a borrower will use
the borrowed funds for the purpose promised. The Postal Service wants to guarantee that a
contractor will be able to complete an addition to the post office according to the contract
specifications. The contractor should purchase a:
a. bid bond
b. completion bond
c. performance bond
d. contract bond
bid bond Which bond guarantees that the bidder will sign the contract and provide a
performance bond?
a. bid bond
b. contract bond
obligee
,A bond will never pay the principal. The principal is the "bad guy" whose default has resulted in
the "forfeiture" of the bond. The Indemnitor will pay the obligee. The surety may also be
referred to as an "indemnitor." If the principal defaults, the indemnitor is obligated to pay the
penal sum to the:
a. obligee
b. obligor
may be written for any length of time agreed upon by the parties Bonds:
a. may be written for any length of time agreed upon by the parties
b. cannot exceed one year
the Surety to the Obligee if the Principal defaults The bond's penal sum is paid by:
a. the Surety to the Obligee if the Principal defaults
b. the Principal to the Surety as payment for the bond
Surety bonds and Insurance policies are both three party contracts
, See Pages 5-1, 22-3 and 22-4. Property insurance policies are two party contracts. The purpose
of liability insurance is to pay a third party for damages the Insured causes to that person or to
that person's property. Thus, a liability policy is sometimes referred to as a three party contract.
However, the actual contract is negotiated between two parties - the Insurer and the applicant. So
it may also be said that liability insurance is a two party contract (between the Insurer and the
Insured) with payment to a third. Surety bonds are agreed to by three parties and are always
considered three party contracts. Which of the following is FALSE?
a. Surety bonds and Insurance policies are both three party contracts
b. Surety companies do not expect to pay losses
c. Surety companies may recover paid losses from the Principal
d. The purpose of Surety bonds is to guarantee performance
Surety The party who agrees to pay the insured (obligee) for loss caused by employee
embezzlement under a Fidelity bond is the:
a. obligee employer
b. surety
c. principal employee
d. obligor
The surety company through the agent's power account/power of attorney/letter of attorney.
Solutions
The Performance Bond guarantees that a task will be completed on time as per the instructions.
Watch out for the Completion Bond which should been called a "Lender's Bond." The
Completion Bond doesn't guarantee performance - it simply guarantees that a borrower will use
the borrowed funds for the purpose promised. The Postal Service wants to guarantee that a
contractor will be able to complete an addition to the post office according to the contract
specifications. The contractor should purchase a:
a. bid bond
b. completion bond
c. performance bond
d. contract bond
bid bond Which bond guarantees that the bidder will sign the contract and provide a
performance bond?
a. bid bond
b. contract bond
obligee
,A bond will never pay the principal. The principal is the "bad guy" whose default has resulted in
the "forfeiture" of the bond. The Indemnitor will pay the obligee. The surety may also be
referred to as an "indemnitor." If the principal defaults, the indemnitor is obligated to pay the
penal sum to the:
a. obligee
b. obligor
may be written for any length of time agreed upon by the parties Bonds:
a. may be written for any length of time agreed upon by the parties
b. cannot exceed one year
the Surety to the Obligee if the Principal defaults The bond's penal sum is paid by:
a. the Surety to the Obligee if the Principal defaults
b. the Principal to the Surety as payment for the bond
Surety bonds and Insurance policies are both three party contracts
, See Pages 5-1, 22-3 and 22-4. Property insurance policies are two party contracts. The purpose
of liability insurance is to pay a third party for damages the Insured causes to that person or to
that person's property. Thus, a liability policy is sometimes referred to as a three party contract.
However, the actual contract is negotiated between two parties - the Insurer and the applicant. So
it may also be said that liability insurance is a two party contract (between the Insurer and the
Insured) with payment to a third. Surety bonds are agreed to by three parties and are always
considered three party contracts. Which of the following is FALSE?
a. Surety bonds and Insurance policies are both three party contracts
b. Surety companies do not expect to pay losses
c. Surety companies may recover paid losses from the Principal
d. The purpose of Surety bonds is to guarantee performance
Surety The party who agrees to pay the insured (obligee) for loss caused by employee
embezzlement under a Fidelity bond is the:
a. obligee employer
b. surety
c. principal employee
d. obligor
The surety company through the agent's power account/power of attorney/letter of attorney.
