What is a Surety Contract?
Getting a Surety Contract
A Surety Contract is a type of a contract known in the industry as a bond, or a performance bond or surety bond. Unlike a financial bond, this bond is not a debt instrument. Instead, it is more like a financial guarantee or a company guaranty.
A surety contract is an agreement where one party guarantees the performance of another party. Typically, this type of arrangement is done through a three party agreement. In this tri-party agreement, or surety bond, the surety will provide assurance that one party (the Obligor) will perform according to the terms of the bond or else the surety will provide recompense to the aggrieved party (the Obligee).
This surety contract can either be based on the individual being underwritten or a specific job. If it is personal to a specific individual, then the surety is guaranteeing to the Obligee that the Obligor will do the job given without stealing money or non-performance.
Many times, a surety contract is based on a specific job. Known as a performance bond, the surety agreement is written so that the Obligor will perform according to the terms of that contract. If not, the surety will then provide another entity to perform according to the terms or provide compensation to the Obligee.