In a surety bond context, what does the term 'obligee' refer to?

In the context of a surety bond, the term 'obligee' refers to the party benefitting from the bond's service. This individual or entity is essentially the recipient of the guarantee provided by the surety bond. The bond is a three-party agreement among the principal (the party that is required to perform the duties), the surety (the party that guarantees the obligation), and the obligee.

In this arrangement, if the principal fails to fulfill their obligations, the surety will step in to cover the financial loss incurred by the obligee. Therefore, the obligee's primary interest is in receiving the performance or fulfillment of the obligation specified in the bond. This understanding is crucial because it highlights the purpose of the bond: to protect the interests of the obligee against potential non-performance or default by the principal.