Which party requires the bond and is protected by its enforcement?

The obligee is the party that requires the bond and is protected by its enforcement. In a surety bond arrangement, the obligee is typically the entity or individual that has an interest in the successful completion of a project or the fulfillment of a contractual obligation. This could be a government agency, a business owner, or a homeowner, for instance.

When the bond is secured, it ensures that the principal (the party that promises to fulfill the obligation) will complete their duties as agreed. If the principal fails to do so, the obligee can make a claim against the bond to be compensated for any losses incurred due to the principal’s default. This is the key mechanism by which the obligee is protected, as the bond serves as a guarantee of performance or payment.

The surety, on the other hand, is the entity that provides the bond, backing the obligation of the principal and guaranteeing payment or completion. The principal is the one whose performance is being assured by the bond, and the contractor is often a specific type of principal involved in construction projects. However, it is the obligee who requires the bond to ensure they have a means of recovery in the event of non-completion or default.