The definition of the

Surety Bond is an additional written agreement between the Principal and the Surety to guarantee the interests of the Obligee party.

Its function is to ensure the Obligee that the principals will meet its obligations in accordance with the principal agreement (contract) made between the Principal and the Obligee.

If the Principal fails to meet its against the Obligee, the Surety will then pay to the Obligee of the maximum losses suffered amounted to the value of the collateral.

Upon payment of the Surety to the Obligee, the principals are willing to pay back to the Surety in the amount of the loss that has been paid by the Surety to the Obligee.

The parties in the Surety Bond


Surety or Guarantor is the insurance companies who have to get permission from the financial services authority (d/h Supervisory capital investment – financial institutions) to publish and provide Assurance to the Obligee.


Obligee or also called the recipients of collateral/Bouwheer is the party that gave the work to the Principal and Surety are benefiting from contracts with the appropriate Principal.


Principal Guaranteed or is a party which accepts the job and obligation to complete the work in accordance with the Obligee.

The Nature Of A Surety Bond

  1. UNCONDITIONAL-the Surety will pay to the Obligee by releasing special privileges as set forth in section 1831 and 1832 KUH Perdata when Principal stated tort according the contract.
  2. IRREVOCABLE guarantees that are already accepted by the Obligee cannot be cancelled by Principal or Surety on the pretext of any kind. The guarantee may only be canceled by the Obligee.

Benefits Of Surety Bond

For Principal

Surety Bond easier to obtained.

The process is fast and relatively cheap service fee guarantee and collateral/collateral is not the main requirements in obtaining a guarantee.

For The Obligee

Provide assurance that the project is managed or owned by the Obligee shall be implemented and completed on time in accordance with the contract.

In other words, Surety Bond or Guarantee are:

Written evidence published Surety to guarantee the Principal will carry out the obligations of an achievement or interest to the Obligee pursuant contract.

In case of tort, then the Surety is responsible for making the payment disbursement of collateral to the Obligee.

Next the Surety is entitled to conduct the prosecution over the disbursement of payment guarantee to the Principal.