A surety is a tripartite agreement, where there are three parties, namely:

Principal or Obligor, where in he/she must perform, truly and faithfully, the obligations set forth in the bond, must pay the premium charges of the bond; and is bounded to the surety to indemnify the latter for losses he may sustain as a consequence of his issuance of the bond.

Surety, wherein he/she must always be ready, willing and able, financially or otherwise to back up its liability under the bond in the event of the Principal’s default.  It must pay the Obligee to complete the unfinished obligations; has the right to be paid the premium charges on the bond for services rendered; has the right to be indemnified by the Principal and/or co-indemnitors; and has the duty to see to it that all requirements of the government and other entities regarding accreditation are duly complied with for the convenience, not only of the public in general, but of the Principal as well.

Obligee, wherein he/she: must insure that the bond inures to his benefit, therefore, he has the right to be secured from loss or damage by reason of the default.

The Three Contracts:

Primary Agreement
– contract between the Principal and Obligee
The Bond
– agreement between the Obligee and the Surety and the Principal
Indemnity Agreement
– the agreement between the Principal and the Surety

Documentary requirement for bond applicants

Residence Certificate
Driver’s License
Income Tax Return (Latest)
Sole Proprietorship
Certificate of Registration of Business Name issued by the Department of Trade and Industry
Registered Partnership
Articles of Partnership or Partnership Agreement
Corporation Articles of Incorporation by-laws
Joint Venture/Consortium
Joint Venture Agreement Consortium Agreement

REQUIREMENTS COMMON TO ALL BONDS

Articles of Incorporation and By-laws
To show the corporate status of the applicant and its corporate powers, particularly if the transaction of the applicant  for whom the bond is required is within its corporate powers, the identities of the incorporators and the capitalization of the corporation

Board Resolution of the Corporation authorizing the named corporate officer to sign the bond and related documents, or copy of the Secretary’s Certificate attesting to the adoption of such resolution
To show if the signatory has the authority to the bond and the indemnity agreement, thereby binding the corporation.

List of Current Officers, Directors of the corporate applicants, certified by the Corporate Secretary
To identify the people currently managing the affairs of the corporate applicant/co signer.

Articles of Partnership
To show the identity of the partners, the managing partner authorized to sign for and bind the partnership and the capitalization

Joint Venture Agreement/Consortium Agreement
To show the identity of the members if the joint ventures or consortium, the participation of each member in the project and the identity of their representative who is authorized to sign for and bind it.

Bond Application duly accomplished by the applicant
To show the bonafide intention of the applicant to secure the bond from the surety company, other pertinent corporate information and, if, individual applicant, to show his personal circumstances.

Co-Signers Information Sheet duly accomplished by the co-signer
To show the bonafide intention of the proposed co-signer to bind himself/itself as co signer and to disclose pertinent corporate information (if corporate co signer) on the personal circumstances of the individual co signer.

Dated Audited Financial Statement of applicant/co signer on his/its latest income Tax Return filed with the Internal Revenue
To determine if the corporate applicant or co signer has the financial capacity to undertake the project and comply with the bond undertaking as bond principal/co signer.

Certificate of Registration of business name of an individual applicant/ co signor/ corporation
To show if the applicant is an enterprise duly registered with the Bureau of Domestic Trade or Securities and Exchange Commission.

CONTRACTOR’S BOND

Prequalification Statement required by and filed with the Obligee (if available) (Requirement in government infrastructure contracts)
To verify the various documents submitted and to show the applicant’s technical competence and financial capacity to under the Project.

Certificate of Accreditation with the construction industry authority of the Philippines (required for construction contracts)
To show that the bond applicant is an accredited contractor qualified to undertake a construction project under a specified category.  It also shows the applicants’ classification/category as a contractor.

Bid documents (invitation to bid, notice to bidder instruction to bidders, general condition of bidding, etc.)
These documents will show the name of the Obligee, date time, and venue of the Bidding and more important, the name of the project, materials and services to be bidded and the conditions of the bidding.

Contracts documents (construction contract, service contract, purchase order, job/work order, indent order, change/violation order, notice, letter of award, supplemental
These documents will show the name and the exact description of the project materials, and services awarded to the successful bidder and all the terms and conditions of the contract.