Bonds and guarantees are normally required under the terms of a construction or engineering contract, or in accordance with mandatory legal requirements, to secure the obligations of the principal debtor (generally known as the principal) against the beneficiary.
They guarantee the performance of a variety of obligations, from construction or service contracts, to licensing and to commercial undertakings. Almost any sale, service or compliance agreement can be secured by a surety bond.
A surety bond is an agreement, issued by an insurance company, which (in most cases) provides for monetary compensation in case the principal fails to perform. Although many types of surety bonds exist, the two main categories are contract and commercial surety.
For more information, please visit the surety Frequently Asked Questions.