How to take the proper administration of a bond policy

When registering a breach of contract by the guarantor, the beneficiary of the bond policy has the right to issue the corresponding claim and be compensated.

In order to be able to prove the existence and enforceability of the guaranteed obligation, the beneficiary must immediately notify the Surety, which is known as Prior Notice or Preventive Notice. In addition, it is necessary to present a series of documents that prove the non-compliance.

On the other hand, the Surety has the obligation to inform its guarantor that the Beneficiary of the Bond filed a claim for breach. With this, the guarantor will be able to say if he agrees or not with the claim.

For the claim to proceed, it is necessary for the beneficiary to supervise, from the beginning of the term of the contract, that the contractor complies with all the agreed obligations and, above all, that it is within the agreed deadlines.

What can cause that the claim of a bond does not proceed?

There are several causes that may cause the inadmissibility of a claim or claim, one of them is known as  “Extension or Wait”, which is discussed in Article 179 of the Law on Insurance and Surety Institutions.

In the event that the beneficiary wishes to grant an  Extension or Wait, due to the fact that the Fiado will not be able to deliver the object or the work in a timely manner, he must notify the Surety, who will decide whether or not to accept said extension.

If the beneficiary grants an extension that extends the term of the fulfillment of the assumed obligation without notifying the Surety, the policy is automatically extinguished, releasing the Bonding Company from all compensable liability.

Is it effective to have bond policy?

When the beneficiary or contractor notifies the Surety that there was a breach by the Fiado, requesting that the Bond Policy becomes effective , and the Surety detects that the main contract was modified or extended, without having notified it, this will be in its right to reject and / or decline the payment of the  Bond  for having operated in its favor the clause of “Extension or Wait”.

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