Suretyship16

Surety contracts are designed to protect business against the possible dishonesty of their employees. Surety and fidelity bonds¹⁷ fill the gap left by theft insurance, which always excludes losses from persons in a position¹⁸ of trust. A bond involves three contracting parties instead of two. The three parties are: the principal¹⁹, who is the person bonded; the obligee²⁰, the person who is protected; and the surety²¹, the person or corporation agreeing to reimburse the obligee for any losses stemming²² from failures or dishonesty²³ of the principal. The bond covers events within the control of the person bonded, whereas insurance in the strict sense covers loss from random²⁴ events generally outside the direct control of the insured. In bonding, the surety always has the right to try to collect its losses from the person bonded, whereas in insurance the insurer may not attempt to recover losses from the insured. Of course, under property and liability policies the insurer may attempt to recover from liable third parties under the right of subrogation²⁵, but subrogation rights are often not possible to enforce in practice. Bonds are not usually cancelable by the insurer, whereas most insurance contracts, except life, are cancelable by the insurer upon due notice.

Fidelity bonds are written to cover the obligee, usually an employer, against loss from dishonest acts from employees; surety bonds cover not only dishonesty but also an employee's incapacity to perform the work he has agreed to do, such as constructing a building under contract. Surety bonds are normally written on principals who are acting in an independent²⁸ or semi-independent capacity, such as building contractors or public officials, whereas fidelity bonds are written on employees acting under the guidance and supervision of their employer.

Finally, surety bonds are often issued with the requirement of collateral²⁷, whereas fidelity bonds are not. The surety bond is an instrument through which the superior credit of the suretyis substituted for the uncertain credit of the principal; hence²⁸ if the surety is asked to bond a principal of somewhat doubtful credit, the requirement of cash collateral is frequently imposed..

Major types of fidelity bonds. Fidelity bonds differ according to whether specific persons are named as principals or whether all employees or persons are covered as a group. The latter are most frequently used by large employers because they offer automatic coverage on given classes of workers, including new employees, and greater ease of administration, including simpler claims procedures²⁹. Fidelity bonds are usually written on a continuous basis — that is, they are effective until cancelled and have no expiration date. The penalty of the bond (the maximum amount payable for any one loss) is unchanged from year to year and is not cumulative. The bonds specify a discovery period³⁰ (usually two years) limiting the time for discovering losses after a bond is continued. When a new bond is put into effect, it can be written to cover losses that have occurred but are undiscovered before the effective issue date of the bond. A salvage clause³¹ also is included, stating the way in which any salvage recovered by the surety from the principal is to be divided between the surety and the obligee. This clause is significant, because the obligee may have losses in excess of the penalty of the bold. Some salvage clauses require that any salvage be paid to the obligee until he is fully restored for all of his losses, and others provide that any salvage is to be divided between the surety and the obligee on a pro-rata basis³², in the proportion that each, party has suffered loss.

Major types of surety bonds. There are various classes of surety bonds. Contract construction bonds are written to guarantee the performance of contractors on building projects. Bonds are particularly important in this field because of general practice of awarding commercial building contracts to the lowest bidder³³, who may promise more than he can actually, perform. The surety who is experienced in this field is in a position to make sounder judgment about the liability of the various bidders than anyone else and backs up its judgment with a financial guarantee.

Court bonds³⁴ include several different types of surety bonds. Fiduciary bonds³⁵ are required for court-appointed officials entrusted with managing the property of others; executors of estates and receivers in bankruptcy are frequently required to post fiduciary bonds. Litigation bonds³⁶ are court" bonds required of plaintiffs and defendants³⁷ in court actions; examples are bail bonds³⁸ guaranteeing that a defendant will appear in court, and appeal bonds³⁹ guaranteeing that a defendant can respond to the extra costs incurred in appealing an adverse decision.

Other types of surety bonds include official bonds⁴⁰, lost instrument bonds⁴¹, and license⁴² and permit bonds⁴³. Public official bonds guarantee that public officials will faithfully and. honestly discharge their obligations to the state or to other public agencies; Lost instrument bonds guarantee that if a lost stock certificate, money order, warehouse receipt, or other financial instrument falls into unauthorized hands and causes a loss to the issuer of a substitute instrument, this loss will be reimbursed. License and permit bonds are issued on persons such as owners of small business to guarantee reimbursement for violations of the licenses or permits under which they operate.

NOTES

1. as regards con/ 2. disastrous adj		— в том, что касается — катастрофический
disaster n		— катастрофа
3. insurer n		— страховщик
4. consideration л		— вознаграждение
5. insured n		— страхуемый
6. relies heavily on...		— в значительной степени отражается на...
7. standpoint n 8. close adj		— точка зрения — точный (верный) расчет
9. severity of losses		— тяжесть потерь
10. insurance underwriter		— страховщик
11. premium n		— вознаграждение
12. legal liability		— юридический риск
13. punitive taxation		— разрушительно высокие налоги
14. currency debasement		— обесценение (девальвация) валюты
15. peril n		— опасность
16. suretyship n		— поручительство
17. surety and fidelity bonds		— поручительства и обязательства лояльности
18. persons in a position		— лица, облеченные доверием
19. Drincioal n		— зд. основной должник (в отличие от поручителя)
20. obligee n		— лицо, по отношению к которо-му принято обязательство, кредитор по обязательству
obligor n		— лицо, принявшее на себя обязательство, должник по обязательству, дебитор
21. surety n		— поручитель
surety on (for) a bill		— аваль, авалист
22. to stem v		— вытекать, быть результатом
23. failures or dishonesty		— ошибки или нечестность
24. random adj		— бессистемный, случайный
25. subrogation n		— суброгация
subrogee n		— лицо, к которому переходят права в порядке суброгации
26. building contractor 27. collateral n		— строительный подрядчик — залог
28. hence conj		— поэтому
29. claims procedure		— исковая процедура
30. discovery period		— срок давности (правонарушения или ошибки)
31. salvage clause		— статья о возмещении убытков через их взыскание
32. pro-rata basis		— пропорциональный принцип
33. lowest bidder		— предлагающий низшую цену
34. court bond		— судебное обязательство, обязательство возместить издержки (поделу)
35. fiduciary bond			— обязательство доверенного лица (фидуци-ария)
fiduciary n, adj			— фидуциарий, фидуциарный
36. litigation bond			— судебное (процессуальное) обязательство
litigant nto			— тяжущаяся сторона
litigate v			— быть тяжущейся стороной, оспаривать
litigation n			— судебный иск, процесс
37. plaintiffs and defendants			— истцы и ответчики
38. bail bond			— поручительство за явку ответной стороны в суд
39. appeal bond			— обязательство возместить понесенные противной стороной издержки по апелляции
40. official bond			— подписка о надлежащем исполнении должностных обязанностей
41. lost instrument bond			— поручительство за потерю (утрату) документа
42. license bond			— лицензионное обязательство
43. permit bond			— обязательство, связанное с разрешением на какой-либо вид деятельности (бизнеса)