It is an administrative work and supply bond, it guarantees the beneficiary the amount of money against delivery of the advance payment bond, the amount of money is delivered to the contractor or supplier, it must be used as agreed in the contract, purchase order or order.
The bonds that can be guaranteed are advance payment, performance, hidden defects, good quality, retentions, conventional penalties or any obligation that may prevent a detriment to the Beneficiary’s assets.
Guarantees the risk and avoids surprises in the fulfillment of the obligation. The proper use of the advance payment is regulated by the Law of Insurance and Bonding Institutions.
The Advance Payment Bond Definition, is the guarantee of resources delivered, the amount of money that the Creditor Beneficiary, delivers to the Debtor, and this responds for the destination in which the money is used in the fulfillment of the obligation assumed in the contract.
The benefit of the contractor when granting an advance payment bond is that it assures the Beneficiary to guarantee the fulfillment of the obligations assumed by the contractor and the payment in reimbursement in case the contractor does not comply with the obligation.
The surety is normally a bonding institution that offers to the public the bonding service for valuable consideration, the certainty of the bond is that it guarantees the performance if the obligor does not comply with the obligation agreed in the main contract.
With the main contract, the type of obligation to be guaranteed is determined, thus, when the type of obligation is determined, an Advance Payment Bond, Performance Bond, Good Quality Bond or Hidden Defects Bond is requested.
The commercial bond is a conventional bond that is needed to guarantee the business or commercial transaction, this commercial bond must be regulated by the authorization of the Federal Government.
Bonds are derived from contracts, thus the existence of a contractual relationship guarantees the fulfillment of obligations derived from the contract, thus we have the construction contract, the lease contract, the contract for the supply of goods or services.
The most common contracts that can be bonded are the purchase and sale as a supply of products or merchandise, the lease that contract that grants the temporary use of a property in exchange for a rental payment.
Types of bonds
It is a guarantee instrument in commercial transactions or any contract, through which an entity guarantees the fulfillment of the obligations contracted with another, generating confidence and security in all business areas, since a third party (the surety or insurer) becomes guarantor of the faithful fulfillment of that contract.
In the event that Company B defaults on its obligation, then the insurer is responsible for returning to Company A the money it advanced to Company B, through the execution of the bond. The insurer must pay the beneficiary and proceed to exercise its right to recover from Company B, without prejudice to Company A, which was able to recover its investment thanks to the Surety Bond.
Example of a surety bond
By means of this modality, a person (guarantor) commits to the payment of a debt in favor of a third party, who will be able to make use of the bond in case of failure or breach of the obligation on the part of the debtor.
After looking at many apartments, you finally decide on one. Depending on whether the tenant is an individual or a professional, the security deposit may change. It also depends on the area and the legal security. However, it is normal that once you decide that you are going to rent that apartment and you reach an agreement, you will have to pay a month or two months of rent as a deposit.
What does the person renting the apartment (the landlord) get out of this? It reduces the risk of non-payment. If there is non-payment, the landlord keeps the deposit. And, in addition, if there are damages it can not return the deposit. For example, if we break a door for an inadequate use of the same one, it can that the lessor deducts the cost of repair of the deposit.