As we saw with our blog post on statutory bonds, a governmental entity was requiring a surety bond be obtained. With Nonstatutory bonds, we find that there is another type of entity requiring a bond be obtained which, could be a private sector business or even an individual. The bond in both cases is being required by a contract between the principal and the obligee. The obligation is dictated in detail within the contract.
The private sector uses Nonstatutory bonds such as contract bonds like governmental agencies do as well as Nonstatutory bonds construction bonds. We find that private owners of property will require Nonstatutory bonds of contractors, and GCs (General Contractors) to require bonds from their subcontractors. Unfortunately for many in the private sector, project owners will not ask their GCs and other contractors for Nonstatutory bonds performance bonds/ performance guarantees for a contractor that would in fact qualify for a bond.
The private sector also uses other types of bonds such as financial guarantee bonds. Examples of these include lease bonds that guarantee the payment of rent by the person leasing a property and a lost instrument bond. A loss instrument bond makes it so people can replace a lost physical stock or bond certificate.
Surety Bond and Insurance
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