Problems Associated With Formation And Application Of Surety Bonds Under Ethiopian Insurance Law

The making of insurance surety bonds in Ethiopia is atypical from the conventional way of doingrnthe same elsewhere. These bonds, being signed only between a surety and account party,rnembodies terms and conditions which obtrude obligations on a non signatory party for whosernbenefit they are made and this way of doing the business has thus far sourced variousrnenforcement challenges the solution of which has been observed to be perplexing. Particularly,rnthe disputed application of privity rule in the context of the relationship that exist between arnsurety, obligee and account party in a surety bond arrangement has been a conundrum tornobligee`s claim and surety`s defense. In fact the capability of such bonds to validly source rightsrnand duties among the involved parties is contentious and the discord stems from the existence orrnnot of enabling legal base to run such business by Ethiopian insurers. This thesis, usingrnqualitative research method, argues the multidimensional problems which the use of insurancernbonds as security devices are undergoing in Ethiopia insurance industry are attributable to thernabsence of a clear enabling legal base for insurers to run such business, the mis characterizationrnof theserndevices as insurance policies, the incompatibility which the making of the bondrncontracts have with existing laws and the inadequacy of the latter to regulate the peculiaritiesrnthese devices possess.

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