It is important to remember the three main parties to the surety bond:
- Surety– This is the entity (typically, a division of an insurance company) that issues the bond. The surety guarantees obligations on behalf of its principal, such as the performance of the contract in the event of a default (performance bond) or the payment to those subcontractors and suppliers working under the contractor-principal providing labor, services, or materials (payment bond).
- Principal – This is the entity (contractor) that the surety bond is issued on behalf of. The principal along with personal and corporate guarantors will execute a General Agreement of Indemnity before the surety bond is even issued outlining the rights and remedies of the principal/guarantors and the surety.
- Obligee – This is the entity (or entities) that can make a claim against the bond and who the bond is ultimately intended to benefit.
Please check out this article for more information on the nuts and bolts of surety bonding.
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