Essentially, a surety bond amounts to a contract between at least three different parties. One is guaranteeing that a certain outcome will occur, another is being guaranteed of the outcome and the third is providing the backing for the guarantee.
- The obligee is the person or party in the contract who is being promised a certain outcome or obligation. They could be guaranteed that a service will be performed or that a bid will be honored if accepted, for example.
- The principal is the one who is carrying out the promised responsibilities. They would be the contractor who is completing a project or the company making a bid and promising that it will be honored if accepted.
- An indemnitor is someone backing up the principal’s contract to the surety. The principal is one indemnitor and the owner of the company that is the principal could be another.
A surety bond is required anytime there might be some question as to whether the principal can complete a task it is promising to complete, or whenever the interests in that service or task being performed are large. A common example would be a public works project in which the surety bond would protect taxpayer interests.
The Miller Act requires surety bonds for certain Federal projects, and many states have similar laws on the books as well. The Miller Act primarily applies to construction projects on public buildings or public works that exceeds $100,000. Regulations on the books require surety bonds on those types of projects in excess of $150,000.
We want to make it easy to expedite all of your bonding needs. When your clients need to apply for a bond, we encourage you to have them fill out our enrollment application (found here) and to put your information in the referral section. This way we can expedite the application and give you credit for the client after their sign up is completed.