Principal’s skills are verified by the surety company before the issuance of surety to the obligator. Before the issuance of the surety to the contractor, the surety company verify that the contractor satisfy all requirements of the contract. The surety will be in a position to undergone the risk, In default of the contractor. The surety has to undertake the performance or the payment of the obligee in failure of the contract. In such a situation, the surety pre qualify the requirements of the contractor in a thorough and rigorous manner and also see to that, the contractor will satisfy the needs of the surety. This prequalification is rigorous process.
The contractor is required to satisfy the following requirements.
• He should have the ability to meet the obligation of the contract.
• He should ensure the obligee, that he will give a faithful performance of the contract.
• He should procure good reference and reputation in the market regarding his contract business.
• He should have proper financial capability regarding his economic soundness.
• Has per the assurance he has to fulfill the performance of the contract.
• His book should show financial soundness of the company for the past few years.
Surety
A surety is a guarantor for the performance of the principal against the contract. The surety undertakes the risk by guarantying against the principal. The surety enforces the contractor to perform the contract, in failure of the principal. The obligee can sue the surety for the failure of the principal’s performance.
Oblige
An oblige is a person who receives the benefit of the surety bond. The obligee is said to be the owner of the contract and he receives the performance of the contractor. The obligee makes payment to the contractor for completion of contract. In failure of the contract, the obligee can sue the principal and the surety against claims. The owner can ask the surety to complete the contract, if principal failed in his performance.
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