A surety bond is a three-party agreement whereby the surety company guarantees to the obligee (the owner of project) that the principal (the contractor) will perform a contract according to the agreed terms and conditions of the contract, and within the allocated time and budget. Thus, the risks of project completion are shifted from the owner to the surety company.
Surety bonds used in construction are called contract surety bonds. Company generally issues surety bonds on behalf of contractors engaged in main construction of buildings, ships, shipyards and oil rigs among others. There are three primary types of contract surety bonds:
Payment /Advance Payment Bond
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