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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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