Definition

Noun: 1. A financial guarantee: A surety bond is a three-party contract where a surety (often a specialized company) guarantees to one party (the obligee) that another party (the principal) will fulfill an obligation, such as performing a task or meeting terms set by law or contract. If the principal fails, the surety is financially liable to the obligee. 2. A risk management tool: It is a form of credit used to protect against loss due to non-performance, default, or dishonesty, ensuring compliance with laws, regulations, or contractual terms.

Usage

A surety bond is a specific type of bond, not a general synonym for all bonds. It is used in legal, financial, and commercial contexts to guarantee performance or payment. - Common Contexts: Construction contracts, court proceedings (e.g., bail bonds), licensing for professionals (e.g., notaries), and compliance with government regulations.

Examples

• The city required the construction company to post a surety bond before beginning work on the public library.
• To obtain a license as a contractor, he had to provide a surety bond to protect his future clients.
• The court set bail at $10,000, which could be satisfied with cash or a surety bond from a licensed bail bondsman.

Advanced Usage

• "to underwrite a surety bond": For a surety company to assess risk and agree to issue the bond.
  • The insurer agreed to underwrite the surety bond after a thorough review of the contractor's finances.
• "to forfeit a surety bond": To lose the bond's value due to the principal's failure.
  • The company forfeited its surety bond when it abandoned the project.

Variants and Related Words

• Surety (n): The party (company or person) that guarantees the principal's obligation; the guarantee itself.
• Performance Bond (n): A common type of surety bond guaranteeing the satisfactory completion of a project.
• Bid Bond (n): A type of surety bond guaranteeing that a bidder will enter into a contract if awarded the project.
• Payment Bond (n): A type of surety bond guaranteeing that a contractor will pay its subcontractors and suppliers.

Synonyms

• Guarantee bond: A bond serving as a formal promise or assurance.
• Indemnity bond: A bond that provides security against loss or damage (note: subtle legal differences may exist).

Related Phrases

• "bond principal": The party who is primarily obligated to perform and for whom the surety provides the bond.
• "bond obligee": The party protected by the surety bond (e.g., the project owner, the government agency).
• "to be bonded": To have obtained a surety bond, often a requirement for operating a business.
  • All plumbers in this state must be licensed and bonded.

Noun

1. a bond given to protect the recipient against loss in case the terms of a contract are not filled; a surety company assumes liability for nonperformance