Though it’s unusual, there may come a time when you need to cancel a bond you have in effect, or when you face the danger of cancellation by another party. In general, this is not an easy process, as many states have enacted laws over the past several years which restrict the circumstances under which a principal can cancel a bond.

At very least, canceling a bond will require written notice, but the other steps you must take depend on the type of bond in question. Discover the means by which you can cancel a surety bond, or when you might have a bond canceled, and where to find more information today.

How to Cancel a Surety Bond

There are, in general, for specific ways you can cancel a surety bond. The first is when the oblige provides a written letter of approval that states the bond may be canceled. Second, the principal or surety can present a Notice of Cancellation, which terminates the bond on a given specific date, or for the bond term, agreement or statute. Third, if the bond has a date of expiration, it will automatically close at this date. Finally, when the oblige returns the bond to the surety, it can be canceled.

Cancellation Based on Bond Type

Each different type of bond has different provision for closure. Bid bonds, for example, require the bid status to close them out. Performance and Payment Bonds close out when they are completed due to a Consent of Surety, unless subject to additional warranty guarantees. Supply bonds are term-based obligations and cancel at the end of their term.

For financial guarantee bonds, cancellation requires a letter from the Obligee as well as the returning of the bond. Alternately, the Surety can send a Notice of Cancellation. With License and Permit Bonds, a letter or notice from the Principal or Obligee that states the bond isn’t needed anymore will trigger a notice from the Surety.

Court bonds can only be canceled if a judge signs a legal affidavit. The original bond may also be required to be returned. Finally, public official bonds require a signed release letter from a proper official with authority to release the bond.

Bonds and Cancellation Clauses

Many bonds contain a specific cancellation clause, which will allow the surety company to send a notice of non-renewal or cancellation. This notice has to comply with the terms of the clause, as well as being in conformance with any applicable laws in the state. The Principal can usually spot a cancellation clause simply by reading the bond form.

In some cases, however, continuous bonds don’t contain such a clause. In these cases, the only way they can be canceled is when the Obligee issues a letter of release. This letter must state the name of the Principal, the bond number, and the date of termination for the liability.

National Surety Services, Inc.

If you’re in need of surety services, or more information about the laws, statutes and requirements in your state, NSSI is here to help. Check out our range of surety services, and get in touch to start the process today!