Problems Associated with Formation and Application of Surety Bonds under Ethiopian Insurance Law
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Date
2020
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Addis Ababa, Ethiopia
Abstract
The making of insurance surety bonds in Ethiopia is atypical from the conventional way of doing
the same elsewhere. These bonds, being signed only between a surety and account party,
embodies terms and conditions which obtrude obligations on a non signatory party for whose
benefit they are made and this way of doing the business has thus far sourced various
enforcement challenges the solution of which has been observed to be perplexing. Particularly,
the disputed application of privity rule in the context of the relationship that exist between a
surety, obligee and account party in a surety bond arrangement has been a conundrum to
obligee`s claim and surety`s defense. In fact the capability of such bonds to validly source rights
and duties among the involved parties is contentious and the discord stems from the existence or
not of enabling legal base to run such business by Ethiopian insurers. This thesis, using
qualitative research method, argues the multidimensional problems which the use of insurance
bonds as security devices are undergoing in Ethiopia insurance industry are attributable to the
absence of a clear enabling legal base for insurers to run such business, the mis characterization
of these
devices as insurance policies, the incompatibility which the making of the bond
contracts have with existing laws and the inadequacy of the latter to regulate the peculiarities
these devices possess.
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Keywords
Insurance Law