What is Surety Bond?

Legal Definition
A surety bond or surety is a promise by a surety or guarantor to pay one party (the obligee) a certain amount if a second party (the principal) fails to meet some obligation, such as fulfilling the terms of a contract. The surety bond protects the obligee against losses resulting from the principal's failure to meet the obligation. Posting bail for people accused of crimes in exchange for freedom is common in the United States, but uncommon in the rest of the world.
-- Wikipedia
Legal Definition
Sometimes, when a party owes others legal duties, the party posts a surety bond to guarantee their performance. The surety bond is like a security deposit, with the party promising to do something as the renter and person they owe obligations to, or obligee, is like the landlord. Thus, if the party that made the promise fails to perform their duty, the obligee is compensated out of the bond.

Surety bonds are most frequently used to secure fiduciary relationships, and international, large, or complex transactions . For example, many jurisdictions require guardians to post a surety bond before formally taking responsibility for their wards. Similarly, a company making a large purchase from a foreign supplier might require the supplier to post a surety bond.
Legal Definition
When an insurer agrees to finish a project even if the original party defaults. The three players are the principal performing the act, the surety who takes the place of a principal if default occurs, and the obligee who is owed the performance. Refer to