What term refers to the party issuing a surety bond?

The party issuing a surety bond is referred to as the surety. This role is crucial in the context of bonding because the surety is the entity—often an insurance company or a specialized bonding company—that guarantees the obligations of the principal (the party that needs the bond) to the obligee (the party that receives the benefit of the bond).

In a surety bond agreement, the surety provides a guarantee that the principal will fulfill their contractual obligations. If the principal fails to do so, the surety is responsible for compensating the obligee. This relationship ensures that the obligee is protected against the risk of non-performance by the principal. By assuming this risk, the surety essentially takes on the role of a financial backer, offering assurance and stability in contractual relationships, especially in construction and service industries where performance and completion are critical.

The other terms, such as principal and obligee, refer to the parties involved in the bond agreement but do not pertain to the entity that issues the bond. The contractor is often the principal in construction settings, but it does not define the role of the surety. Understanding these roles enhances comprehension of the dynamics in bonding arrangements and the responsibilities involved.