If the principal cannot complete the contract due to bankruptcy, the surety's remedy is to

• A. Sue the contractor for breach of contract.
• B. Make arrangements with the obligee to complete the job.
• C. Take over the contractor's business.
• D. Indemnify the principal for any losses suffered.

Answer: (B)

The key idea is that a surety’s role is to ensure the contract is completed for the obligee. When the principal can’t finish because of bankruptcy, the surety must step in to protect the obligee’s interests by arranging for the job to be completed. This typically means finding a substitute contractor or otherwise coordinating completion with the obligee’s approval, so the project is finished up to the bond amount. Suing the contractor wouldn’t directly guarantee completion, and taking over the contractor’s business isn’t the usual remedy. Indemnifying the principal is not a remedy that protects the obligee’s interests on the project itself; the surety may seek recovery from the principal later, but the immediate duty is to arrange for completion.