Commercial Surety Bonds
Commercial surety bonds can be used to guarantee the performance of contractual obligations imposed on an insured by third parties, such as a municipality, court, utility company, or other entity.
What is a Surety bond?
A surety bond is a contract between three parties: the principal, the obligee and the surety. It is a promise to pay or carry out an act and guarantees a contractual agreement between three parties.
The three parties in a surety agreement are:
- The principal (the person who needs the bond)
- The obligee (the person requesting the bond)
- The surety company (the company providing the bond)
The bond protects the interests of the parties involved in nonpayment, nonperformance, and good faith dealings.
If an insured does not comply with the obligation imposed by the third party and the debt is substantial enough to cause financial harm, the party can have their claim paid by the surety bond company.