Who are the primary parties involved in a surety bond?

In a surety bond, the primary parties involved are the obligee, the principal, and the surety.

The obligee is the party that requires the bond, typically as a form of protection against the risk of the principal failing to fulfill obligations outlined in a contract or agreement. The principal is the party that purchases the bond and is responsible for completing the obligations as per the contract. Lastly, the surety is the entity that issues the bond and guarantees that the principal will fulfill their obligations. If the principal fails to meet those obligations, the surety will step in to cover the financial losses incurred by the obligee, up to the limit of the bond.

Understanding the roles of these parties is essential as it clarifies the function of a surety bond in various contractual relationships, particularly in construction and service contracts.