Bonds

A bond is a contract binding one party financially for the performance by another in completing an obligation. A fidelity or surety contract involves three parties: a principal who promises performance; a surety who guarantees fulfillment and a third party; the obligee, to whom these promises are made. If the principal does not achieve as promised, the surety must indemnify the obligee. Bonds that guarantee the principal’s honesty are fidelity bonds. Bonds that guarantee the principal will accomplish certain tasks are surety bonds.