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Bonds: Contractors, Utility & Fidelity

A surety bond is a contract among at least three parties:
  • The principal – the primary party who will be performing a contractual obligation
  • The obligee – the party who is the recipient of the obligation, and
  • The surety – who ensures that the principal’s obligations will be performed.

A key term in nearly every surety bond is the penal sum. This is a specified amount of money which is the maximum amount that the surety will be required to pay in the event of the principal’s default. This allows the surety to assess the risk involved in giving the bond; the premium charged is determined accordingly.

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