This is an interest bearing certificate private or public indebtedness. It is an agreement under seal where by a person called the ‘Obligor’ bonds himself to another ‘obligee’ to perform or refrain from an action. It may be a ‘simple bond’ without condition or a ‘common money bond’ – given to secure payment of money. It binds the obligor’s real and personal estate. It is an interest-bearing document based on a long-term debt, usually issued by corporations. Bond can also be a form of financial guarantee and it taken to protect the employer’s interest in the contractual arrangement where the insurer guarantees the contractor’s performance thereby standing as a surety with a pledge to make good the losses incurred by the principal as a result of non-performance on the part of the contractor. There are various types of bonds in an insurance industry; these are:
- Advance payment bond: This is a situation where before any advance payment is made to a contractor, he will be required to obtain an advance payment bond from insurers(s) when the contractor fails to carry out his responsibility; the insurer will pay for the advance made.
- Performance bond: This kind of bond commits the surety to ensuring that the physical work called for by the contract bond is completed and turned over to the owner in a finished state. It does not commit the surety to any payment other than to ensure that the contractor will pay all labour and material bills incurred.
- Customs bond: This is when the duty on merchandise has been assessed and paid to the government, risk ceases, occasions when government fails to receive the duty of the purpose of custom land is to protect the government against this risk.
- Bid bond: This is required in connection with submission of tenders for contracts with public authorities and private owners. It guarantees that of the bidder wins the award, he or she will sign the contract and post a performance bond.
- Book value: This is the capital amount at which property is shown on the book of account. Usually it is the original cost less reserved for depreciation plus addition to capital. It can also be said to be the original cost of a property plus allowable additions including capital improvements, certain carrying costs and assessments. Depreciation taken and particular sales.
- Bond for deed is a contract to sell real property in which the purchase price is to be paid by the buyer to the seller in instalments and in which the seller, after payment of a stipulated sum, agrees to deliver title to the buyer. It may also be called a ‘contract for deed’.
Reference
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