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39 Pub. Cont. L.J. 269 (2009-2010)
The Importance of Surety Bond Verification

handle is hein.journals/pubclj39 and id is 277 raw text is: THE IMPORTANCE OF SURETY
BOND VERIFICATION
Edward G. Gallagher & Mark H. McCallum
I. Introduction .................................................................................... 269
II.  C orporate  Sureties ...........................................................................  271
Im.  Individual or Personal Sureties ........................................................  273
IV.  Recom  m endations ............................................................................  281
V.  C onclusion  .......................................................................................  282
I. INTRODUCTION
A surety bond is a contract involving three parties in which the surety
promises to answer for the debt or default of another. The party primarily
liable is called the principal, and the party protected by the bond is called
the obligee. On public construction projects, three types of bonds are rou-
tinely required: bid bonds, performance bonds, and payment bonds. A bid
bond guarantees that if the contract is awarded to the principal, the principal
will execute the contract and provide the required performance and payment
bonds. The performance bond guarantees to the owner that the contract will
be completed in return for payment of the contract price. The payment bond
obligates the principal and surety to pay for labor and material furnished
to the principal, or to a first-tier subcontractor of the principal,' for use in
1. In some states, the public works payment bond extends coverage beyond suppliers to first-
tier subcontractors and covers persons who contracted with second-tier or lower subcontractors.
See, e.g., MD. CODE ANN., STATE FIN. & PROC. § 17-108 (West 2009); Union Asphalt, Inc. v.
Planet Ins. Co., 27 Cal. Rptr. 2d 371, 375 (Cal. Ct. App. 1994).
Edward G. Gallagher is a graduate of Williams College and The George Washington Uni-
versity National Law Center He is general counsel of The Surety & Fidelity Association of
America and a past chair of the Fidelity and Surety Law Committee of the Tort Trial and
Insurance Practice Section of the American Bar Association. He is a frequent speaker on topics
related to fidelity and surety bonds. Mark H. McCallum serves as the chief executive officer of
the National Association of Surety Bond Producers (NASBP), located in Washington, D.C.
NASBP is an international association of companies employing professional surety bond pro-
ducers and brokers. McCallum previously served as NASBP's general counsel and director of
government relations, directing its government relations, industry relations, legal, and other
functions. McCallum received his B.A. degree from Vanderbilt University and his J.D. degree
from Tulane University Law School. He is a member of the Virginia State Bar, the Association
of Corporate Counsel, and the Section of Puhlic Contract Law and the Forum on the Construc-
tion Industry of the American Bar Association.

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