13 C.F.R. § 115.10 Definitions.
Title 13 - Business Credit and Assistance
AA/SG means SBA's Associate Administrator for Surety Guarantees. Affiliate is defined in part 121 of this chapter. Ancillary Bond means a bond incidental and essential to the performance of a Contract for which there is a guaranteed Final Bond. Bid Bond means a bond conditioned upon the bidder on a Contract entering into the Contract, and furnishing the required Payment and Performance Bonds. The term does not include a forfeiture bond unless it is issued for a jurisdiction where statute or settled decisional law requires forfeiture bonds for public works. Contract means a written obligation of the Principal requiring the furnishing of services, supplies, labor, materials, machinery, equipment, or construction. A Contract must not prohibit a Surety from performing the Contract upon default of the Principal. A Contract does not include a permit, subdivision contract, lease, land contract, evidence of debt, financial guarantee (e.g., a contract requiring any payment by the Principal to the Obligee), warranty of performance or efficiency, warranty of fidelity, or release of lien (other than for claims under a guaranteed bond). It includes a maintenance agreement of 2 years or less which covers defective workmanship or materials only. With SBA's written approval, it can also include a longer maintenance agreement covering defective workmanship or materials, or a maintenance agreement covering something other than defective workmanship or materials. To qualify for such approval, the agreement must be ancillary to the Contract for which SBA is guaranteeing a bond, must be required to be performed by the same Principal, and must be customarily required in the relevant trade or industry. Execution means signing by a representative or agent of the Surety with the authority and power to bind the Surety. Final Bond means a Performance Bond and/or a Payment Bond. Imminent Breach means a threat to the successful completion of a bonded Contract which, unless remedied by the Surety, makes a default under the bond appear to be inevitable. Investment Act means the Small Business Investment Act of 1958 (15 U.S.C. 661 et seq.), as amended. Loss has the meaning set forth in §115.16. Obligee means: (1)(i) In the case of a Bid Bond, the Person requesting bids for the performance of a Contract; or (ii) In the case of a Final Bond, the Person who has contracted with a Principal for the completion of the Contract and to whom the primary obligation of the Surety runs in the event of a breach by the Principal. (2) In either case, no Person (other than a Federal department or agency) may be named co-Obligee or Obligee on a bond or on a rider to the bond unless that Person is bound by the Contract to the Principal (or to the Surety, if the Surety has arranged completion of the Contract) to the same extent as the original Obligee. In no event may the addition of one or more co-Obligees increase the aggregate liability of the Surety under the bond. OSG means SBA's Office of Surety Guarantees. Payment Bond means a bond which is conditioned upon the payment by the Principal of money to persons who have a right of action against such bond, including those who have furnished labor, materials, equipment and supplies for use in the performance of the Contract. A Payment Bond can not require the Surety to pay an amount which exceeds the claimant's actual loss or damage. Performance Bond means a bond conditioned upon the completion by the Principal of a Contract in accordance with its terms. Person means a natural person or a legal entity. Premium means the amount charged by a Surety to issue bonds. The Premium is determined by applying an approved rate (see §§115.32(a) and 115.60(a)(2)) to the bond or contract amount. The Premium does not include surcharges for extra services, whether or not considered part of the “premium” under local law. Principal means, in the case of a Bid Bond, the Person bidding for the award of a Contract. In the case of Final Bonds and Ancillary Bonds, Principal means the Person primarily liable to complete the Contract, or to make Contract-related payments to other persons, and is the Person whose performance or payment is bonded by the Surety. A Principal may be a prime contractor or a subcontractor. Prior Approval Agreement means the Surety Bond Guarantee Agreement (SBA Form 990) entered into between a Prior Approval Surety and SBA under which SBA agrees to guarantee a specific bond. Prior Approval Surety means a Surety which must obtain SBA's prior approval on each guarantee and which has entered into one or more Prior Approval Agreements with SBA. PSB Agreement means the Preferred Surety Bond Guarantee Agreement entered into between a PSB Surety and SBA. PSB Surety means a Surety that has been admitted to the Preferred Surety Bond (PSB) Program. Surety means a company which: (1)(i) Under the terms of a Bid Bond, agrees to pay a sum of money to the Obligee if the Principal breaches the conditions of the bond; (ii) Under the terms of a Performance Bond, agrees to pay a sum of money or to incur the cost of fulfilling the terms of a Contract if the Principal breaches the conditions of the Contract; and (iii) Under the terms of a Payment or an Ancillary Bond, agrees to make payment to all who have a right of action against such bond, including those who have furnished labor, materials, equipment and supplies in the performance of the Contract. (2) The term Surety includes an agent, independent agent, underwriter, or any other company or individual empowered to act on behalf of the Surety. [61 FR 3271, Jan. 31, 1996; 61 FR 7985, Mar. 1, 1996]
Title 13: Business Credit and Assistance
PART 115—SURETY BOND GUARANTEE
Subpart A—Provisions for All Surety Bond Guarantees
§ 115.10 Definitions.
