Who purchases a surety bond and promises to fulfill the obligation?

The principal, also known as the obligor, is the party that purchases a surety bond and commits to fulfilling the obligation defined in that bond. This obligation typically involves completing a contract or fulfilling certain conditions, like fulfilling the terms of a construction project, paying debts, or adhering to regulatory requirements.

In essence, the principal is the one whose performance is being guaranteed by the surety company. If the principal fails to meet the terms of the obligation, the surety company is responsible for stepping in and fulfilling the duty, which highlights the relationship between these parties.

The obligee is the entity that receives the benefit of the bond and is usually the party that requires the bond as a form of protection against the principal’s potential failure. The guarantor is someone who provides a guarantee to ensure the principal will fulfill their obligations, essentially acting as an additional layer of assurance but not the primary party purchasing the bond. The surety is the company that underwrites the bond and agrees to assume the risk if the principal defaults, but does not make the promise or commitment that the principal does.