Surety bonds

by Guest » Wed Oct 03, 2012 11:49 am
Guest

Can anyone please explain how a surety bond works?

Total Comments: 1

Posted: Thu Oct 04, 2012 12:22 pm Post Subject:

A surety bond is a guarantee of specific performance related to a contract. An obligor (Principal) promises to perform (to build a home, to make a movie, to act in a movie, to pay a debt) to the obligee (the party to whom the promise has been made. A surety is the party who guarantees the performance by the obligor -- if the obligor fails to honor its promise, the surety can "step into the shoes" of the obligor and indemnify the obligee -- to complete the construction, movie, pay off the debt.

A surety bond is simply a contract of a stated maximum amount of indemnification in the event the obligor fails to perform. The obligor or the obligee pays the premium for the contract according to the terms of their agreement.

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