When under the law or a contract, an entity is required to provide a surety to guarantee the fulfillment of its obligations, a surety bond is a wise choice. The advantages of this choice are numerous:
- the first one is not to deposit the financial resources of an entity in order to issue a surety to the oblige (the beneficiary).
- it is a viable alternative to a bank guarantee, in a sense that the bank guarantee would otherwise become a part of the overall exposure of the bank towards the principal and affect its creditworthiness.
- and finally, the CDA 40’s signature in favor of the obligee (the project owner) shall ensure that the principal (contractor) will be able to meet its contractual commitments.
The demand for sureties is also increasingly common in contracts between private parties as a mean of a guaranty.
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