Question & AnswerQ&A (CDA MEMORANDUM CIRCULAR NO. 2011-13)
A surety bond is a promise to pay the obligee if the principal fails to fulfill contractual obligations and involves three parties: obligee, principal, and surety, serving as a guarantee insurance. A fidelity bond is an insurance protecting policyholders from losses caused by fraudulent acts of specified individuals, primarily employees, acting with manifest intent to cause loss, serving as crime insurance.
The three parties involved in a surety bond are (1) the obligee, who is the recipient of the obligation, (2) the principal, who performs the contractual obligations, and (3) the surety, who assures the obligee that the principal can perform the task.
They must be covered by a surety bond because it assures the obligee that the principal (those handling funds) will fulfill their contractual obligations, providing a guarantee against failure to meet those obligations as mandated by Article 56 of R.A. 9520.
A fidelity bond provides insurance protection against losses due to fraudulent acts or dishonest conduct by specified individuals, typically employees, that cause the business financial harm.
Losses covered by a fidelity bond include company monies, securities, and other property lost through dishonest acts of employees who have the intent to cause loss.
A surety bond is a contract involving at least three parties that guarantees the obligee will be compensated if the principal fails to perform a contractual obligation.
No, while called bonds, fidelity bonds are actually insurance policies protecting employers against employee dishonesty losses, not contracts guaranteeing performance like surety bonds.
The surety assures the obligee that the principal will perform the contractual obligations and compensates the obligee if the principal fails to meet these obligations.
Other crime-insurance policies include coverage for burglary, fire, general theft, computer theft, disappearance, fraud, and forgery, all aimed at protecting company assets from various forms of criminal acts.
The requirement is mandated under Article 56 of Republic Act No. 9520.