A performance bond guarantees the performance of a contract or other obligation. Bonds are three party instruments by which one party guarantees or promises a second party the successful performance of a third party.

1. The Surety - is usually a corporation which determines if an applicant (principal) is qualified to be bonded for the performance of some act or service. Is so, the surety issues the bond. If the bonded individual does not perform as promised, the surety performs the obligation or pays for any damages.
2. The Principal - is an individual, partnership, or corporation who offers an action or service and is required to post a bond. Once bonded, the surety guarantees that he will perform as promised.
3. The Obligee - is an individual, partnership, corporation, or a government entity which requires the guarantee that an action or service will be performed: If not properly performed, the surety pays the obligee for any damages or fulfills the obligation. The example below illustrates how a surety bond works:

Surety: A Form of Credit

Surety is as much like banking as insurance. Bankers extend credit in the form of dollars loaned or as a commitment to loan. Every banker granting a loan fully expects to have the loan repaid. He investigates the borrower in sufficient detail to assure that such will be the case. Surety underwriters proceed in the same way.

Here are some of the common types of bonds that you may need:

• Bid Bonds
• Contract Bonds
• Performance Bonds
• Construction Contract Bonds
• Insurance Bonds
• Contractor License Bonds
• Custom Bonds
• Dishonesty Bonds
• Janitorial Bonds
• Motor Vehicle Dealer Bonds
• Mortgage Broker
• Finance Lender Bonds
• Notary Bonds
• Fidelity Bonds
• Developer Bonds
• Sub Division Bonds
• Service Contract Bonds
• Commercial Bonds
• License/Permit Bonds