I____________________________S/o ______________________ do hereby Solemnly declare and Affirm that I shall pay ________________ (___________________________________________) Rupees in case Mr / Miss /Mrs __________________________________________S/o,D/o, W/o______________________________ does not return to _____(COUNTRY NAME)____________ after participation in __________________________ to be held form _________________ to___________________ at__________________________________.
Legal and Institutional References (Pakistan) Surety Bond
The legal framework for surety bonds in Pakistan is primarily rooted in contract law and civil procedure, and is specifically applied by large institutions like the Higher Education Commission (HEC) for academic programs.
Category
Reference / Citation
Key Principle Explained in the Content
Primary Legal Framework
Contract Act, 1872, Section 126
Defines a “Contract of Guarantee” (Surety Bond) involving three parties: Surety, Principal Debtor, and Creditor (Obligee).
Co-Extensive Liability
Contract Act, 1872, Section 128
States that the liability of the Surety is co-extensive with that of the Principal Debtor, meaning the Surety is equally and directly liable for the debt.
Surety’s Right to Indemnity
Contract Act, 1872, Section 145
Provides an implied promise by the Principal Debtor to indemnify (reimburse) the Surety for any sums rightfully paid under the guarantee. (This is why it is NOT insurance).
Enforcement in Execution
Code of Civil Procedure (CPC), 1908, Section 145
Clarifies that a decree (court order) can be executed against a Surety even if they were not a formal party to the original suit, reinforcing their direct liability.
Institutional Application
HEC Scholarship/Training Bond Documents
These documents formally require the execution of a Surety Bond, Guarantee, and Declaration of Assets to ensure the scholar serves Pakistan for a prescribed period upon completion of studies abroad.
Liability Limit
Relevant Case Law (e.g., Lahore High Court Rulings)
Judicial precedent confirms that the Surety’s liability is strictly limited to the specific amount stated in the bond and cannot be extended beyond what was expressly undertaken.
FAQS
What is the purpose of a surety bond?
A surety bond provides a financial guarantee that one party (the Principal) will fulfill a contractual or legal obligation to a second party (the Obligee). If the Principal fails, the third party (the Surety) is obligated to step in and cover the financial loss, often seeking reimbursement later.
What is a travel bond?
A travel bond is a type of commercial surety bond, often required by government entities or sponsoring organizations, to guarantee that a specific individual will return to their home country after a trip abroad. It financially ensures compliance with visa or program terms, mitigating the risk of illegal immigration or “brain drain.”
What is the surety bond law in Pakistan?
Surety bond law in Pakistan is primarily governed by the Contract Act, 1872 (Section 126 onwards), which defines the contract of guarantee. Specific applications, such as for government scholarships or legal proceedings, are enforced through institutional rules (like those of the HEC) and the Code of Civil Procedure (CPC), 1908.
What is a bonded travel agent?
A bonded travel agent is a travel agency that has purchased a surety bond guaranteeing compliance with industry regulations and consumer protection laws. The bond protects consumers against financial loss if the agency fails to deliver booked services due to bankruptcy or fraudulent action.
What does TTA mean in travel?
TTA often stands for Travel and Tourism Agency or, more commonly, Travel Trust Association. The Travel Trust Association is a trade association in the UK that provides financial protection for travel consumers through a trust model, ensuring that payments are held securely until travel is completed.
Who is protected by a surety bond?
The Obligee is the party protected by a surety bond. In a typical scenario (e.g., travel, construction), this is the entity—such as a government agency, sponsoring body, or consumer—that would suffer a loss if the Principal defaults on their obligation.
How are surety bonds calculated?
The cost (premium) of a surety bond is typically a small percentage (often 1% to 15%) of the full penalty amount, calculated based on the Surety’s financial assessment of the Principal. This calculation involves evaluating the Principal’s credit score, financial stability, and the overall risk of the obligation being breached.
Are surety bonds risky?
Yes, surety bonds are risky, especially for the Surety. Unlike insurance, the Surety is obligated to pay the loss and then pursue the Principal for repayment, meaning the Surety is primarily bearing the financial risk of the Principal’s non-performance.
What are the benefits of surety?
The primary benefits of surety are providing financial security for the Obligee and establishing trust and credibility for the Principal. It enables the Principal to secure contracts, licenses, or travel opportunities that would otherwise be unavailable due to high risk.
Who uses surety bonds?
Surety bonds are used by anyone requiring a financial guarantee of performance, including government agencies (for public works projects), licensing bodies (for businesses like auto dealers or money exchanges), and sponsoring institutions (for scholars or employees traveling internationally).
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