A. Introduction

• Library: SC Construction Law Desk Book (SCBar) (2013 Ed.)

A. Introduction

The purpose of this chapter is to provide an overview of suretyship issues that a construction lawyer may encounter. The materials include a discussion of South Carolina case law, and where no South Carolina law exists, the materials look to other states for guidance. The chapter is by no means an attempt to provide an in-depth discussion of all suretyship issues, and the authors would point the reader to other sources drafted specifically for that purpose for a more in-depth discussion of surety issues. The authors would also like to recognize the significant contribution of several North Carolina construction lawyers, whose work product from the North Carolina Construction Law Deskbook, where appropriate, has been incorporated into this chapter and re-printed here with the permission of the North Carolina Bar Association Foundation. Those sections are identified in several footnotes through the chapter.

A surety bond is a tripartite agreement among the surety, the principal, and the obligee. In the construction contract, the parties are typically the surety, the contractor (the principal) and the project owner (the obligee). The owner will request a bond from the contractor to ensure the contractor's performance on the project. If the contractor defaults on the project, the owner can look to the surety to assume the obligations of the principal. In satisfying those obligations, the surety has several options, which are discussed below.

Because a bond is a simple contract, its terms are to be given their plain meaning, and the surety's express obligations in the bond cannot be extended by implication.¹ The bond makes the surety and principal responsible to the obligee...