What limitations can a surety bond impose on the principal?

A surety bond can impose limitations on the principal, particularly concerning their ability to accept additional contracts or bonds. This limitation is crucial because the surety wants to ensure that the principal does not take on obligations beyond their capacity to fulfill, which could increase the risk of a claim against the bond. By restricting the principal from entering into additional contracts, the surety seeks to manage potential liabilities and protect its financial interests.

In many cases, the surety evaluates the financial and operational capabilities of the principal before issuing the bond. If the principal were allowed to accept new projects indiscriminately, there could be an increased exposure to defaults or claims, which would adversely affect the surety's obligations.

The other options do not accurately reflect the typical scope of limitations imposed by a surety bond. For instance, while a principal may need to provide financial information or seek consent for expenses under certain circumstances, these are not standard limitations imposed by all surety bonds. Only in a specific arrangement or under particular conditions would these requirements apply, making them less universally applicable than the restriction on accepting additional contracts or bonds.