A type of surety bond, a commercial 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.
With surety bonds there are always 3 parties involved.
The 3 parties involved are:
- The Principal – the primary business entity who will be performing a contractual obligation.
- The Obligee – the party who is the recipient of the obligation.
- The Surety – who ensures, guarantees the principal’s obligations will be performed. Sureties are similar to insurance companies.
This agreement says that the Surety agrees to uphold – for the benefit of the obligee – the contractual obligations made by the principal, if the principal shall fail to uphold their agreement with the obligee. Often consumers require a bond before they will agree to enter a contract with a contractor.
The 2 main categories of Surety Bonds:
- Contract Surety Bond
- Commercial Surety Bond
A Nevada Contract Surety Bond guarantees a specific contract. A Nevada Commercial Surety Bond guarantees the terms of the Bond form instead of a contract.
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