If your business has received a notice that its surety bond is being canceled, it’s important to take action right away. This can be a sign that there are problems with your business, and you need to address them as soon as possible. In this blog post, we’ll explain why your bond might have been canceled and what you can do to get it reinstated.
Can the surety bond be Cancelled?
The short answer is yes, a surety bond can be canceled. However, certain conditions must be met for this to happen. For example, the cancellation must be requested by the principal (the party who purchased the bond) and it can only be done if there is a valid reason for doing so.
Cancellation based on Bond Type
We often get asked about how to cancel a surety bond. The answer is quite simple and is based on the type of bond that you have.
If you have a contract bond, also known as a performance bond, then you need to follow the terms of your contract to cancel the bond. This usually means giving the obligee (the entity that required the bond) advance notice and may also require you to provide a replacement bond.
On the other hand, if you have a fiduciary bond, such as a probate or guardianship bond, then you can cancel the bond at any time by sending a notice of cancellation to the court.
Finally, if you have a commercial bond, such as a license or permit bond, you can cancel the bond by sending a notice of cancellation to the obligee. However, keep in mind that some states require you to give advance notice before canceling a commercial bond.
Can all Surety Bonds be canceled?
The reason that not all surety bonds can be canceled is that they are contracts. And, like all contracts, once they are signed, all parties are legally bound to uphold their end of the agreement. So, if a contractor wants to cancel their bond, they would need to get the permission of both the obligee and the surety.
What is a Cancellation Notice for a surety bond?
A Cancellation Notice is a notice that is sent to the obligee when the surety bond is no longer in force. The reason for the cancellation can vary, but typically it is due to the expiration of the bond or because the bond has been terminated by the surety company.
Why do Surety Companies send cancellation Notices?
There are several reasons why a surety company may send a notice of cancellation to its clients. In some cases, the notice may be sent because the company is no longer able to provide coverage for the client. In other cases, the notice may be sent because the client has failed to make premium payments or has otherwise violated the terms of their policy.
What does it mean for a bond to be Cancelled?
There are a few reasons why an issuer might choose to cancel a bond. One reason is that the issuer is unable to make the required interest payments. In this case, the issuer will likely default on the bond and be forced into bankruptcy. Another reason an issuer might cancel a bond is to avoid a potential default. If the issuer knows it will soon be unable to make interest payments, it may choose to cancel the bond to avoid a default.
Are surety bonds returned?
Yes, in most cases surety bonds are returned. However, there are a few exceptions. If the project is not completed or if there are any outstanding claims against the bond, the surety company will not return the bond premium. Additionally, if the obligee (the entity that required the bond) requests a cancellation of the bond, the surety company will also keep the premium.
What does it mean to discharge a surety?
What does it mean to discharge a surety? In short, if you are a surety on someone’s debt and they fail to make payments, you are responsible for the debt. There are various ways a surety can be discharged, such as if the debtor pays off the full amount owed or if both parties agree to release the surety from their obligation. If you have questions about your rights and obligations as a surety, be sure to speak with an experienced attorney.