Contracts and legal agreements form the foundation of many different businesses. Among the most important legal documents commonly used are surety bonding solutions.
Bonds are issued in many different industries due to the important role they play in guaranteeing the quality of services delivered. Bonds can protect customers from negligent service providers and offer a guarantee that a contract will be fulfilled according to the terms that were agreed upon.
Delaware surety solutions are regularly used in industries such as construction, insurance and finance. Due to the important role that bonds play, it is essential to understand what they are and how they work. The bond can become complicated to understand, depending on their specific functions. Call us today, and we’ll show you how to get bonded in Delaware.
Understanding Surety Bonds in Delaware
When explained in the simplest terms, a bond is a contract that involves three separate parties. The concept of a bond arises when a person/business requires a particular service from another entity. The party that is seeking the service would want to make sure that they will get what they pay for, and receive the service according to the standards stipulated in the contract. If the party that is providing the service fails to fulfill its role, the service recipient would want to be compensated for any damages that they incurred.
But how can a service recipient incur damages as a result of a negligent service provider? This can happen in many different ways. For example, if a real estate investor wants a certain project carried out, they may seek the services of a contractor. The contractor may initially agree to complete the project but end up either doing a poor job or not paying subcontractors and other employees. In such a case, the aggrieved parties may decide to sue the real estate investor for the actions of the contractor.
It can also happen that the contractor causes damages to the property of the real estate investor during the project. To avoid this level of risk and losses, the investor may request a surety bonding information from the contractor as a guarantee of their services. The surety will ensure that if the contractor fails to fulfill their obligations, the investor can make a claim against the bond and be compensated for any damages incurred.
According to the legal terms of the bond, the service recipient is referred to as the obligee, and the service provider is the principal. An obligee will typically request the principal to issue them with a bond when the obligee seeks the principal’s services.
To obtain a bond, the obligee will apply for one from an insurance company referred to as the surety. The surety will agree on the terms of the bond with the principal and issue the bond to them. If an obligee claims a bond, the surety will honor the claim made and seek compensation from the principal. Therefore, the principal and surety will agree on the terms of the bond as well as repayment.
The Dual Role of Bonds
Sureties act as an extension of credit to the principal, and an insurance policy to the obligee. This is because the obligee can have peace of mind that if the contract is violated, they can make a claim against a bond for any damages they incur.
On the other hand, when the principal has a claim made against them, they don’t have to cough up high out of pocket expenses to settle the claim. They can have the surety settle the bond and they will repay them on a later date. Most bonds are issued at only a fraction of the cost to the principal (1-15% of the face value of a bond in Delaware).
Types of Bonds
With the important role that bonds play, there are many different types of bonds that are issued in the state of Delaware. Some industries require them for a person to operate, and some recommend them as a form of professionalism. Some of the most common surety bonds Delaware include:
- Licensed lender bonds – Persons or businesses that lend out money in the form of loans are required to obtain a licensed lender bond. A bond ensures that all licensed lenders comply with the Delaware code when issuing loans to individuals or businesses. Any damages that are incurred by the lender as a result of negligence can be recovered by the aggrieved party claiming a bond.
- Contractor bonds – A regular requirement for most public construction projects, contractor bonds are issued by a construction company to ensure that they carry out the project to the standards stipulated in the contract. They also protect project owners from the negligent actions of contractors during their contract.
- Check casher bonds – Companies in Delaware that cash checks and money orders are required to issue a $5,000 bond. The bond protects consumers and the state from wrongful actions of the check cashing company, such as fraud, omissions and neglect.
How to Obtain a Delaware Bond
Delaware bonds are now easier to access, thanks to advancements in technology. Most people can now apply for sureties online from the bond provider’s website. Applications can also be made in person or over the phone. Call us, or apply online, and we’ll guide you through the bonding process in Delaware.
When applying for a surety, you will need to provide information about yourself and your business, the type of surety that you need, and your financial background. If you are unsure about what kind of bond you need, we can help with that. The surety company will need this information to determine your eligibility for the bond and the amount you are likely to pay in premiums. You may need to provide your credit history for the surety to establish your creditworthiness.
Our team provides affordable bonding solutions and fidelity bond insurance. Every Delaware bond is prepared on a specific Delaware bond form, as prescribed by the entity requiring the bonding (obligee). Below is a list of commonly requested surety types in Delaware.
- Bond Insurance
- Notary Public
- Private Investigator
- Process Server
- Sales Tax
- Title Bond
- Utility Deposit