Understanding Sureties: Why Do They Do What They Do?

• Pages: 9-22
• Date: 01 October 2025
• Published date: 01 October 2025
• Author: Douglass F. Wynne Jr.,Ashley B. Robinson
• Subject Matter: Derecho Público y Administrativo

Published in The Construction Lawyer Volume 44, Number 4, ©2025 by the American Bar Association. Reproduced with permission.

All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in

an electronic database or retrieval system without the express written consent of the American Bar Association.

Forum on Construction Law The Construction Lawyer Fall 2025

9

Understanding Sureties: Why Do They Do What

They Do?

Douglass F. Wynne Jr. and Ashley B. Robinson

Douglass F. Wynne is a partner with Simon, Peragine, Smith & Redfearn, LLP in New Orleans, LA.

Ashley B. Robinson is a partner with D’Arcy Vicknair in New Orleans, LA.

Introduction

Immense risks are inherent to construction projects and mitigating those risks is in the best interest of all

parties to a construction contract. Surety bonds are one form of risk mitigation employed to protect against loss

in the event that things go wrong. Bid bonds, performance bonds, and payment bonds are examples of common

bond types used on construction projects to protect the owner, subcontractors, and suppliers from unexpected

costs or liability associated with contractor default. To better understand the risks on a construction project

from the surety’s perspective, this article will discuss why sureties do what they do and more specically, what

factors into a surety’s decision-making process.

The Surety’s Role

In a construction project, the surety’s role is to guarantee the contractual obligations of its principal arising

from an underlying contract. For example, surety bonds issued for a construction project may ensure project

completion in the event of contractor default, or payment to subcontractors and/or suppliers for labor and

materials if the contractor becomes insolvent. Surety bonds are accessory contracts through which the surety

binds itself to fulll the obligations of the principal in the underlying contract.

A surety arrangement is a tripartite relationship between the principal, the obligee, and the surety.1 The bond

principal, usually the general contractor, is primarily liable for its own obligations pursuant to an underlying

construction contract.2 The obligee, usually the project owner, is entitled to enforce the principal’s contractual

obligations against the principal and, in the case of default of the principal, against the surety.3 The surety

provides the bond that serves as a guarantee to the obligee that the principal’s contractual obligations will be

fulfilled, even if the principal defaults.4

The tripartite surety relationship is created by issuance of a bond, which is a contract by which the surety

binds itself to “stand in the shoes” of the principal.5 Because a bond is fundamentally a contract, it is typically

subject to general rules of contractual interpretation.6 The surety’s liability is, therefore, “dependent upon the

specific language of the bond” that created the surety’s obligations to the principal and obligee.7 As an accessory

contract, the surety bond creates liability for the surety only to the extent that the principal is liable to the

obligee pursuant to the underlying construction contract. The nature and extent of the surety’s obligations to

both the principal and obligee depend on both the bond’s language and the type of bond at issue.8 The surety’s

liability will generally be limited to the “penal sum” (i.e., the sum stated on the face of the bond) and dictated

by the statute or contract that required the bond to be furnished.9

The surety’s right to reimbursement from the principal for loss incurred because of the principal’s default

is fundamental in the surety tripartite relationship. The surety’s role is to guarantee that the principal’s