Common in the construction industry, the surety protects the project owner by guaranteeing that the contractor will perform his contractual obligations. If the contractor defaults, the project owner (the obligee) calls the upon surety to pay damages (the additional costs of completing the work) up to the amount of the bond. The surety (the obligee) has recourse against the contractor (the principal). The bond may incorporate a payment bond guaranteeing that the contractor will pay sub-contractors and for the contract materials. See MAINTENANCE BOND; RETENTION BOND; STREET WORKS BOND.
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A bond that guarantees the property owner (the obligee) that the contractor with the winning bid on a job will perform as promised and on time.