Collateral security is the surety’s leverage
Check Out Edward Yankelunas's Guest Column in Business First
As everyone involved in the construction industry knows, the party holding the money has important leverage. That party is able to gain concessions it may not otherwise be able to obtain as it is also able to reduce its risk. Collateral security is a key remedy available to a surety to gain that critical level of bargaining strength and protection. So long as the amount demanded is reasonable when compared to the surety’s potential financial exposure, when properly invoked, the surety’s right to demand collateral security usually leaves the party obligated to respond with few options other than to comply and pay the money demanded.