Surety bonds are used to guarantee to one party the performance obligation of another party. A third party, the Surety Company, is the party that stands behind the guarantee. The party whose performance is guaranteed by the Surety is the Principal. The party requiring the guarantee is the Obligee.

Surety bonds can come in many forms and be required in several industries. Some business owners will never have the need for a surety bond while others find it necessary to seek bonds on a regular basis.