A type of bond designed to guarantee the performance of obligations under a contract. These bonds guarantee the obligee that the principal will perform according to the terms of a written contract. Construction contracts constitute most of these bonds. Contract bonds protect a project owner by guaranteeing a contractor’s performance and payment for labor and materials. Because the contractor must meet the surety company’s pre-qualification standards, construction lenders are also indirectly assured that the project will proceed in accordance with the terms of the contract.