A surety bond is a contract among at least three parties:
Through a surety bond, the surety agrees to uphold — for the benefit of the obligee — the contractual promises (obligations) made by the principal if the principal fails to uphold its promises to the obligee. The contract is formed so as to induce the obligee to contract with the principal, i.e., to demonstrate the credibility of the principal and guarantee performance and completion per the terms of the agreement.
Contract bonds are used heavily in the construction industry, are a guarantee from a Surety to a project's owner (Obligee) that a general contractor (Principal) will adhere to the provisions of a contract.
Included in this category are:
There are also miscellaneous contract bonds that do not fall within the categories above, the most common of which are subdivision and supply bonds.
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