What is Surety?

Surety Bond – A surety bond is a promise to pay one party (the obligee) a certain amount if a second party (the principal) fails to meet some obligation, such as fulfilling the terms of a contract. The surety bond protects the obligee against losses resulting from the principal's failure to meet the obligation.  The three parties to a surety bond are the principal, the obligee and the surety.

• Principal: The party who bears primary responsibility on a surety bond and who has the duty to perform for the obligee’s benefit.
   
• Surety: The party that guarantees the fulfillment of the principal’s obligation to the obligee for an underlying contract, permit or law.
   
• Obligee: The party to whom a bond is given and who is protected against loss.

There are two main categories of bonds that Western National specializes in: Contract Surety and Commercial Surety.

• Contract Surety: Contract bonds guarantee the performance of public or private contracts.  Examples of bonds within this category are bid bonds, performance bonds, and payment bonds.
   
• Commercial Surety: Commercial surety bonds, or noncontract bonds, involve all other situations in which sureties guarantee performance of obligations that generally do not arise from contracts.  This is a diverse group of bonds, including license and permit bonds, court, judicial, public official and miscellaneous bonds.

Source: Principles of Suretyship, by Fitzgerald, Britt, & Waldorf (2010), published by The Institutes