A surety is a person who promises to answer for the debt, default or miscarriage of another with respect to an undertaking according to a bond. Surety bonds are frequent requirements of construction contracts, professional licenses, permits, notaries, estate and trust fiduciaries, in court proceedings, and other commercial settings. Cantafio & Song has experienced attorneys in surety law, including representation of sureties, principals, and bond claimants/obligees with respect to a wide variety of surety bonds and litigation including claims, surety defense, indemnity, and subrogation.
A surety bond is a triparte contractual agreement in which a Surety guarantees that its Principal will perform, pay, or comply with conditions, or the Surety will pay or perform at the demand of the Obligee according to the terms/limits of its Bond.
Surety: a person who promises to answer for the debt, default or miscarriage of another with respect to an undertaking according to a bond.
Principal: the person whose undertaking the surety guarantees under a bond. Principals are responsible for performance or payment according to their contract, license, permit, fiduciary obligation, etc. Only if the Principal fails in their undertaking does a claim arise against the surety on its bond. Principals are required by contract to indemnify their surety for all losses under the bond.
Obligee: the person to whom the Principal owes an obligation. An Obligee may make a claim on a bond where the Principal fails to perform its obligation.
Contact our Surety Law group leader, Eric N. Kibel, for a free consultation regarding your surety claim, defense or other surety litigation issue today. Our surety team has represented sureties, principals, and claimants/obligees on a wide variety of surety claims, and defenses including involving construction bonds, license and permits bonds, and various court bonds. In addition to Colorado and California, Cantafio & Song has attorneys admitted to practice in Alaska, Missouri, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, Wyoming and the District of Columbia to help you with your surety litigation needs.
- Payment Bonds – Payment bonds typically protect both the project owner and a general contractor’s subcontractors and suppliers. In the event payment is not made when due by a general contractor, a surety can be called upon under its bond by the owner to remove mechanic’s liens and other claims by subcontractors and suppliers against title to the real property being improved. Subcontractors and suppliers also may make a claim on the bond for the amount due them from the general contractor. General contractors may also require payment bonds from their downstream subcontractors.
- Performance Bonds – Performance bonds protect a project owner with regard to a general contractor’s performance of a construction contract. If the contractor defaults in its contractual obligations, the project owner may call upon the surety to hire a replacement contractor to complete the project. In such circumstances, the surety is typically entitled to credit for any remaining contract balance not already paid to the general contractor, and the surety can be liable up to the penal sum of its bond to complete the project and/or for damages incurred by the owner for delays. General contractors may also require performance bonds from their downstream subcontractors.
- Lien/Stop Notice Release Bonds – Contractors and project owners may obtain lien release bonds or stop notice release bonds in order to unencumber a property or contract balance from lien or stop notice claims by subcontractors or suppliers. The lien or stop notice claimant may thereafter pursue their claims for payment against the surety on its bond.
- Public Works – Payment and Performance Bonds are frequent requirements of public works contracts, including Miller Act bonds for federal projects, and statutorily required bonds for state and local government projects, including Public Private Partnership (P3) projects in many states.
- Contractors – Construction contractors are often required by state or local law to post a bond as a condition of obtaining a contractor’s license.
- Motor Vehicle Dealers
- Other Professionals
- Oil & Gas – Developers of oil and gas wells are required to provide various surety bonds as conditions of obtaining permits for their activities. These bonds often guarantee a developer’s ability to remediate spills or other environmental contamination, compensate property owners for incidental damage to property or livestock, and for costs to cap abandoned or non-operating wells.
- Building and Construction – Construction permits from state and local entities can frequently require bonds guaranteeing that the conditions of building permits will be followed.
- Estate and Trust Bonds – Executors and administrators of estates, trustees, guardians and conservators are frequently required to post a surety bond with the court as a condition of their appointment guaranteeing that they will perform their fiduciary duties according to the law.
- Appeal Bonds – Appeal bonds may be required of litigants as a condition of obtaining a stay of enforcement of judgment pending appeal.
- Injunction Bonds/Attachment Bonds – Parties seeking to obtain injunctions or a prejudgment right to attachment are frequently required to post a bond in the event the injunction is later dissolved, or the right to attachment found lacking on the underlying claims. Adversely affected parties may then pursue the surety on its bond for damages incurred as a result of a wrongful injunction or attachment, as well as attorney fees and costs.
- Bail Bonds – Bail bonds are a specialized form of surety bond.
- Cost Bonds
If you have any questions about your surety claim, defense or other surety litigation issue, contact us for a Free Consultation!