Surety Bond Explained

A surety bond is a promise from one party that they will pay a certain amount if the second party, known as the principal, fails to meet a previous obligation, such as to fulfill the terms of a contract. Surety bonds serve to protect against losses if one of the parties fails to meet an obligation. The party whose actions are at the center of a surety bond is known as the principal. The party who agrees to pay a surety bond is known as the surety, while the party that accepts the surety bond is the obligee.

Unlike other contracts, a surety bond definition involves three distinct parties to a surety bond. The parties involved in surety bonds are:

The obligee – the party who receives the obligation;

The principal – the primary party who performs the contractual obligation; and

The surety – the party who assures that the obligee that the principal will perform the task.

A commercial surety bond can be:

License or permit bond

Court bond

Public official bond

Lost securities bonds

Hazardous waste removal bonds

Credit enhancement financial guarantee bonds

Appeal bonds

Supersedeas bonds

Attachment bonds

Replevin bonds

Injunction bonds

Bail bonds

Mechanic’s lien bonds

Administrator bonds

Guardian bonds

Trustee bonds

Contractor’s license bonds

Customs bonds

Tax bonds

Reclamation bonds

Environmental protection bonds

Broker’s bonds

Insurance agency bonds

Mortgage agency bonds

Title agency bonds

Employee Retirement Income Security Act bonds

Motor vehicle dealer bonds

Money transmitter bonds

Health spa bonds

Self- insured workers compensation guarantee bonds

Wage and welfare/ fringe benefit bonds.