A surety bond is a three-party agreement that guarantees the performance or obligations of a principal (the party required to perform) to an obligee (the party requiring the bond), backed by a surety (the party providing the guarantee). Essentially, it’s a financial tool ensuring that commitments are met, whether they involve fulfilling a contract, adhering to regulations, or compensating for financial loss.
There are several scenarios where you might need a surety bond. For example, contractors often require performance bonds to assure project owners that they will complete construction projects as agreed. Similarly, businesses needing a license may need a license bond to comply with local regulations. Court bonds, another type, are necessary in legal proceedings to protect against potential losses from court actions, such as appeals or fiduciary duties.