Been wondering what surety bonds are?

October 20, 2009

Being a twenty-something woman in today’s society one would assume that I would know the answer. However like many people I am actually quite in the dark when it comes to this topic. So, what are surety bonds? After a bit of research I compiled the following information. A surety bond is used in several different ways, but there is a basic formula for any situation. It is comprised of three parts; the principle, obligee, and surety. The first party, the principle, is a person or organization being secured against default. The second party, the obligee, is a person or organization who is owed either money or labor. This is where the third party, the surety, comes into play. The surety is a person or organization who promises to pay a certain amount if the “principle” defaults. For example, if after hiring a contractor he does not complete the job, providing he is bonded, one could get a portion of the moneys paid reimbursed. In this situation the contractor would be the principle, the person who hired the contractor would be the obligee, and the company bonding the contractor would be the surety. To answer the question “What are surety bonds?”, surety bonds are a guarantee that works in favor of the customer to ensure that an agreed upon service will be performed or product will be received.

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Filed Under Finances, Management