Surety Bonds

Surety Bonds guarantee of the performance of an obligation.

Surety is not insurance. It is more closely related to the commercial lending practice of financial institutions. As such, it needs to satisfy itself that the party they are bonding has the experience, financial and capital resources necessary to perform their obligations. Further, if called to pay out under a bond, it will seek recovery for their losses under an indemnity agreement or other security typically taken at the start of the relationship.

A surety bond is a guarantee of performance of an obligation. The bond itself gives rise to a three-party relationship where the Surety agrees to fulfil the obligations of the Principal (the ‘insured’ or bonded party) to the Obligee (the beneficiary of the bond), in the event the Principal is unable to do so. The Surety stands behind the Principal as a guarantor or ‘co-signer’. The Surety typically does not become involved unless the Principal is in legitimate default of their obligations to the Obligee, at which point a claim is made under the bond and the Surety steps in to remedy the failure to perform.

Obligations of almost any nature can conceivably be bonded, however, the mainstream use of this product can be classed into two main types:

Commercial Surety

Bonds which are required to satisfy or guarantee fiduciary obligations, governmental legislation, as well as private contractual obligations of the applicant or the Principal under the bond. Bonds sold to companies and individuals in order to satisfy government regulations and court orders, or to replace lost documents such as share certificates. Commercial Surety Products include bonds which respond to federal and/or provincial statutes and regulations. They are usually part of licensing processes and requirements for companies or individuals. Commercial Surety Bonds protect the consumer against fraud, misrepresentation, and compensation of monetary loss and are typically required by federal and/or provincial courts, government bodies, financial institutions, and private corporations.

Examples are:

  • Tax & Excise Bonds, which guarantee payment of excise taxes and guarantee compliance with federal and provincial tax acts and regulations. Types of bonds include:
    • Fuel Tax
    • Non-Resident GST
    • Sales Tax
    • Tobacco Tax
  • License & Permit Bonds, which guarantee compliance with the terms and conditions of various governmental licensing and permitting bodies. These typically respond when it is in the best interest of the public to ensure compliance. Types of bonds include:
    • Collection Agency
    • Consumer Protection
    • Contractor’s License & Permit
    • Electrical Contractors
    • Grain Dealer
    • Highway Transportation
    • Motor Vehicle Dealer
    • Private Investigators
    • Road Cut Bonds
    • Other License & Permit Bonds

Contract Surety

Contract Surety Bonds guarantee the contractual obligations of a contracting entity (the “Contractor”) to the purchaser of their services (the “Owner”). In most circumstances these bonds are required by the Owner as part of the Contractor’s contract terms and conditions.

Binks does business with several Surety Companies which offer contract surety facilities primarily to construction companies, service contractors, suppliers and manufacturers for:

Bids and Tenders – There are commonly two types of bonds that contractors are required to post when bidding work:

  • A Bid Bond guarantees that the Contractor will enter into a contract with the Owner for the amount of its bid, if successful, or the Surety will pay the difference between the Contractor’s bid price and the next lowest price, subject to amount of the bond.
  • An Agreement to Bond is a commitment by the Surety to provide the Owner with Performance and Payment Bonds as required in the tender documents.

Final Contract Security — There are commonly two type of bonds that contractors are required to post as security for their contractual obligations:

  • Performance Bonds guarantee the Contractor will perform its obligations to the Owner according the terms and conditions of the contract.
  • Often accompanying Performance Bonds are Labour and Material Payment Bonds which offer payment protection to the Contractor’s subcontractors and suppliers;

Accounts are typically underwritten with a view to establishing surety facilities to support a contractor’s long term bonding needs. Nonetheless, we will consider ‘one shot’ deals for single use bond requirements.


  • Developers
  • General Contractors
  • Subcontractors
  • Road Contractors
  • Sewer and Water main Contractors
  • Other Heavy Civil Contractors
  • Service Contractors (Waste Removal, Janitorial Firms, etc.)
  • Specialty Contractors
  • Manufacturer


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