A bond which the surety agrees to answer to the obligee for the non-performance of the principal (also known as the obligor).
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US: A contract under which one party (the surety) guarantees the performance of certain obligations of a second party (the principal) to a third party (the obligee). For example, most construction contractors must provide the party for which they are performing operations with a bond guaranteeing that they will complete the project by the date specified in the construction contract in accordance with all plans and specifications.
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A three-party agreement guaranteeing that a principal will carry out the contractual obligations the principal has agreed to perform or, alternatively, to compensate the other parties to the contract for losses resulting from the principal’s failure to perform. Under many surety bonds, the principal is a contractor.
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Bond guaranteeing that a principal will carry out the contractual obligations the principal has agreed to perform, or alternatively, to compensate the other parties to the contract for losses resulting from the principal’s failure to perform. Under many surety bonds, the principal is a contractor, a person seeking a license or permit, or someone involved in a lawsuit in litigation. See Also: “Guarantee Insurance.”