Obligee

Example

“The city served as the obligee on the contractor's performance bond, ensuring they would be compensated if the construction project wasn't completed properly.”

Memory Tip

Remember 'ObligEE' with 'EE' - the obligee is the one who will rEcEivE the benefit or payment if something goes wrong.

Why It Matters

If you're hiring contractors or working with bonded professionals, you may be the obligee on their bonds, giving you financial protection if they don't fulfill their promises. Understanding your rights as an obligee helps you know when and how to make claims for compensation when services aren't delivered as promised.

Common Misconception

People often confuse obligee with obligor, thinking the obligee is the one who owes something. In reality, the obligee is the protected party who receives compensation, not the one who owes performance. The obligee is essentially the beneficiary of the bond arrangement.

In Practice

Maria hired a roofing contractor for a $15,000 job, and the contractor provided a $20,000 performance bond with Maria as the obligee. When the contractor abandoned the project halfway through, Maria (as obligee) filed a claim with the surety company. The surety investigated and paid Maria $8,000 to hire another contractor to complete the work properly. As the obligee, Maria was protected from the contractor's failure to perform, receiving compensation she wouldn't have had without the bond.

Etymology

From French 'obliger' meaning 'to bind' or 'to oblige,' combined with the suffix '-ee' indicating the recipient of an action. The term emerged in legal English during the 15th century.

Common Misspellings

Related Terms

More in insurance

Other insurance terms you should know

See Also