A Three-Party Agreement Between the Principal, Obligee and a Surety Company
Surety Bond Parties:
- Principal is the entity that is required to purchase the bond that guarantees an underlying obligation.
- Obligee is the entity that requires the Principal to purchase a bond that guarantees the underlying obligation for their benefit.
- Surety is the entity that issues a bond on behalf of a Principal for the benefit of the Obligee.
Contract Bonds comprise Bid Bonds and Performance & Payment Bonds
A Bid Bond, issued by a Surety on your behalf, is for the benefit of an Obligee. By providing a Bid Bond, Surety guarantees that if you are the awarded bidder on the respective project, Surety will then supply a Performance & Payment Bond guaranteeing the terms of the awarded contract.
A Performance & Payment Bond is required once you obtain a Contract for the respective project. By providing a Performance & Payment Bond, Surety guarantees that you will fulfill all terms of the underlying Contract.
Commercial Bonds represent an extensive range of bond types that are not classified under Contract Bonds such as license and permit, ERISA, Fidelity, Vehicle Dealer, and various other miscellaneous bonds. These types of bonds typically do not have an underlying contract agreement. The bond form generally acts as the agreement.
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