Surety’s Right To Exoneration
What Does Surety’s Right To Exoneration Mean?
The surety’s right to exoneration refers to the common law right that the surety has against the principal debtor. When a debtor fails to fulfill the obligations owed to the creditor as outlined in the contract, the surety becomes liable for paying the debt to the creditor. In such cases, the surety has the legal right to compel the principal debtor to fulfill their debt, thereby “exonerating” the surety from the obligation to pay.
Insuranceopedia Explains Surety’s Right To Exoneration
A surety bond is a contract involving at least three parties: the creditor, the principal, and the surety. By signing the bond, the surety agrees to fulfill the contractual promises or obligations made (or owed) by the principal if the principal fails to meet those obligations to the obligee. In this way, the surety signs the bond for the benefit of the obligee, thereby encouraging the obligee to enter into a contract with the principal.
If the debtor is unable to repay the debt to the creditor, the surety is required to fulfill the debtor’s obligations. Should the surety pay the debt, they acquire all the rights the creditor originally held, including the right to sue or file a claim against the principal for the amount owed.
