What Is a Surety Bond?
A surety bond is a three-party agreement that guarantees one party will fulfill an obligation to another. The principal (who must perform), the obligee (who is owed the performance), and the surety (usually a bonding company that backs the obligation) are the three parties. If the principal fails, the surety steps in to satisfy the obligation or pay, then seeks reimbursement from the principal.
Common Types of Surety Bonds
- Performance bonds — guarantee a contractor will complete a project
- Payment bonds — guarantee subcontractors and suppliers are paid
- License and permit bonds — required to obtain certain business licenses
- Court bonds — such as appeal or fiduciary bonds
Surety Bonds in Florida
Surety bonds are common in construction — Florida law requires payment and performance bonds on many public projects, and they appear on private projects as well. Unlike insurance, which absorbs the insured's loss, a surety bond ultimately holds the principal responsible: the surety that pays a claim is entitled to recover from the principal. Bonds are also used in probate (fiduciary bonds) and litigation (appeal bonds).
Related Terms
- Performance Guarantee — Often provided through a surety bond
- Guarantor — A related promise to answer for another
- Supersedeas Bond — A surety bond used on appeal
Barnes Walker
Barnes Walker's attorneys handle construction bonding, surety, and bond-claim issues for Florida owners and contractors. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC