Online Transaction Supply Bonds

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Online Transaction Supply Bonds are surety bonds that guarantee the "terms of sale" of ecommerce transactions, and form the basis for the phrases, Bonded Shopping and Bonded Sellers.

Bonded Shopping was pioneered by Steven Woda, the founder of buySAFE, online transaction supply bonds have become the standard method for protecting online shoppers against the risks of purchasing merchandise and services on the Internet. buySAFE is the world's leading provider of online transaction supply bonds in partnership with a number of major surety companies including Liberty Mutual and The Hartford.

The online transaction supply bond is a contract among three parties: (i) a principal (the online seller), (ii) an obligee (the online buyer), and (iii) a surety (a regulated financial institution). Through this agreement, the surety agrees to make the obligee whole (usually by payment of money) if the principal defaults in its performance of its promise (the ecommerce transaction's terms of sale) to the obligee. The surety bond contract is formed so as to induce the obligee to contract with the principal, i.e., to demonstrate the credibility of the principal. Therefore, online transaction supply bonds not only provide comprehensive purchase protection for buyers, but the bonds also send a very strong signal regarding the professionalism, financial strength and integrity of the online merchant(s). This strong Trust Signal enables buyers to know who they can trust when buying online

The online merchants that backup their transactions with surety bonds are referred to as Bonded Sellers, and all of their product inventory can be founded at buySAFE Shopping. All Bonded Sellers have:

• passed a comprehensive business inspection process to ensure they are trustworthy, reliable, and committed to delivering on the promises they make to buyers;
• invited buySAFE to continuously monitor their performance in every transaction; and
• protected their customers from loss by paying for a surety bond (the online transaction supply bond) from one of buySAFE’s surety partners to guarantee each bonded transaction up to $25,000.

On eBay, Bonded Sellers bond millions of product listings each and every day. Overstock.com Auctions requires that all of their Trusted Merchants be Bonded Sellers.

The concept of surtyship and surety bonds originated hundreds of years ago as a mechanism through which trade over long distance could be encouraged. Surety bonds are frequently used in the construction industry: in order to obtain a contract to build the project, the general contractor (the seller) must provide the owner (the buyer) a bond for its performance of the terms of the contract. Under the Miller Act, surety bonds are required for general contractors on all U.S. federal government construction projects where the contract price exceeds $100,000.00.

A key term in nearly every surety bond is the penal sum. This is a specified amount of money which is the maximum amount that the surety will be required to pay in the event of the principal's default. This allows the surety to assess the risk involved in giving the bond; the premium charged is determined accordingly.

If the principal defaults and the surety turns out to be insolvent, the purpose of the bond is rendered nugatory. Thus, the surety on a bond is usually an insurance company whose solvency is verified by private audit, governmental regulation, or both.

The principal will pay a premium (usually annually) in exchange for the bonding company's financial strength to extend surety credit. In the event of a claim, the surety will investigate it. If it turns out to be a valid claim, the surety will pay it and then turn to the principal for reimbursement of the amount paid on the claim and any legal fees incurred.

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