Also known as: surety bonds · surety
Written by attorneys · grounded in primary & secondary sources — see below
A written obligation by which a surety promises to pay a specified sum to an obligee upon the principal's default in performance or payment.
Scott Summers as general contractor defaulted on a public project bonded by Sapphire Technologies. During ensuing litigation the owner sought production of internal memos Sapphire prepared while investigating the default. The court denied the request because the memos were prepared in anticipation of litigation by the surety acting as the contractor's representative.
Sylvia Santos contracted with Starlight Media to build a studio. When Starlight defaulted, the owner called on the payment bond issued by Sierra Solutions. The surety paid the subcontractors and then sued Starlight for reimbursement under the bond terms.
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Sapphire Holdings posted a performance bond for a California construction project. When the project failed, the owner sued the surety in federal court in New York. The court applied California law to interpret the bond because that state was the principal location of the insured risk.
Stephen Shaw signed a surety bond as accommodation party for a loan. He later claimed the signature was obtained under duress. The court examined whether the duress defense could defeat the surety's obligation on the instrument.
Stella Shapiro posted a surety bond to stay execution of a judgment. Opposing counsel moved for sanctions after discovering that Stella had misrepresented assets to the surety. The court considered its inherent authority to impose sanctions on parties and sureties who abuse the judicial process.
Sierra Santos obtained a state-court judgment enforcing a performance bond against Pennzoil. Texaco removed the enforcement action to federal court and sought an injunction. The Supreme Court held that federal courts must abstain from interfering with the ongoing state proceedings concerning the bond.
A surety bond creates a three-party relationship in which the surety answers for the principal's default to the obligee. Insurance typically involves only two parties and spreads risk across many insureds. The surety expects reimbursement from the principal, whereas an insurer does not.
After a debtor assigns accounts as collateral and then defaults, the secured party may step into the debtor's shoes. It may therefore enforce the debtor's rights against both the account debtor and any surety bond securing the obligation.
A party seeking discovery must demonstrate that the materials are otherwise discoverable and that it has substantial need for them and cannot obtain their substantial equivalent without undue hardship.
A beneficiary is an intended beneficiary when the promise manifests an intention to confer a right on that party or to satisfy an obligation the promisee owes the beneficiary. Recognition of the right is appropriate to effectuate the parties' intention.
The validity of a contract of surety insurance and the rights created by it are determined by the local law of the state that the parties understood to be the principal location of the insured risk, unless another state has a more significant relationship.
…history of the Fourteenth Amendment in its reliance on the "compelling state interest" test. See Weber v. Aetna Casualty & Surety Co. , 406 U. S. 164, 179 (1972) (dissenting opinion). But the Court adds a new wrinkle to this test by transposing it from the legal considerations associated with the Equal Protection…