What is a Surety?
Surety refers to a legal agreement in which one party (the surety) agrees to take responsibility for the debt, obligation, or performance of another party (the principal) in the event that the principal fails to fulfill their obligations. Surety is commonly used in various contexts, including contracts, construction projects, court proceedings, and financial transactions. Surety provides a mechanism for parties to mitigate risks associated with contracts, transactions, and obligations by obtaining a guarantee from a third-party surety company. It helps ensure that obligations are fulfilled and provides financial protection in the event of non-performance or default by the principal.
Key Takeaways:
- Surety provides a guarantee to an obligee that a third party (the principal) will fulfill their obligations or duties as outlined in a contract or agreement.
- In the event that the principal fails to fulfill their obligations, the surety becomes responsible for compensating the obligee or fulfilling the obligations of the principal.
- Suretyship helps mitigate risks associated with contractual arrangements by shifting some of the risk from the obligee to the surety company.
Table of Content
- How do Sureties Work?
- What are Surety Bonds?
- How do Surety Bonds Work?
- Purpose of a Surety
- Types of Surety Bonds
- How to Get a Surety Bond?
- What is a Surety Limit?
- Surety – FAQs