Surety
A surety guarantees the performance of another party, often through surety bonds, providing financial assurance and protection for project owners against contractor default.
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Definition
A surety is one who undertakes to guarantee performance by another, often an insurance company.
Purpose
The purpose of a surety is to provide a financial guarantee that a contractor will fulfill their obligations under a contract, protecting the project owner from losses due to contractor default.
Examples of Use
- Construction projects require surety bonds to ensure contractors complete the work as specified.
- Government contracts often mandate surety bonds to protect public funds and ensure project completion.
- Subcontractors may obtain surety bonds to guarantee their performance to the general contractor.
Related Terms
- Surety Bond: A financial guarantee provided by a surety company to ensure contract performance.
- Performance Bond: A type of surety bond that guarantees the completion of a project according to the contract terms.
- Bid Bond: A surety bond that provides financial assurance that the bidder will enter into the contract if awarded.
Notes
Surety bonds are essential for risk management in construction and other industries, providing assurance to project owners and stakeholders that contractual obligations will be met.
Related Terms
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