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Surety Meaning

Surety Meaning

One term that may be heard in finance and business is “surety bond,” particularly when services are being requested  by an individual or business. Though you may have heard this term before, it’s important to know what it is so you can ensure that, if you need one, you have the foundation of knowledge to create the best agreement or contract possible to protect your interests and needs in business.  This post is meant to explain surety meaning.

What Is The Meaning Of Surety

In simplest terms, it is a contract promising that one party (the surety) will pay a set amount of money if a second party (the principal) fails to meet a given obligation. This type of arrangement protects the person who would receive the money (obligee) against any losses in the event the principal fails to meet the obligation. One of the most well-known types of bond is in the criminal justice system. The surety posts bond against the principal’s presence at a court date in order for the principal to be released until that court date. The type used depends on the circumstances in which it is being applied.


When bonds are used, the circumstance in which they are being used determines the type. Further, the type being used determines the requirements for it to be valid and upheld in a court of law. The four types are contract, commercial, business, and penal.  Each of these types serve a specific purpose and is used in a particular circumstance. This section provides and explanation for each of these types of bonds.  We hope is helps demonstrate surety meaning.


Contract are used frequently in the construction industry as part of construction law. In this kind, the project owner is the obligee and the general contractor is the principal. This type ensures that the contractor completes the project as agreed upon between a contractor and project owner. If the involved contractor does not complete the project appropriately, the surety must pay the amount listed in the agreement.

Within the category of contract bonds, there are different types used. The Bid type guarantees the contractor will enter into a contract if the bid is won.

  • Performance bond – Guarantee the contractor will complete the work as required by the contract.
  • Payment bond – Guarantee the contractor will pay for certain services, such as subcontractors and materials used in the project.
  • Maintenance – Guarantee that a contractor will provide maintenance for a specified period of time.


These include a broad scope of agreements that fall outside of the definition of a contract. There are four kinds of commercial bonds.

License and permit which may be required as part of receipt of a license or permit bond to conduct business or engage in certain business activities. Court, whether they are fiduciary or judicial, are those related to the court system. Fiduciary ones deal with probate court. Judicial ones are used when a party is seeking remedies or defending against actions seeking remedies.  The Public official bonds guarantee appropriate completion of responsibilities by elected or appointed officials who must earn and maintain public trust. Finally, miscellaneous include those that do not really fit into any other category of commercial bond, such as hazardous waste removal or self-insured workers compensation.


Business bonds are intended to protect clients from theft when receiving services from an organization. Most often, this type are used when an individual or individuals enter a client’s home, such as in the case of home-cleaning services bond or home health care. If a theft occurs by the bonded entity and the employee is convicted in a court of law, the client is able to make a claim against it. When the claim is paid out, the client is then compensated for the loss that occurred by the bonded entity. For example, if a plumber steals from a customer and is convicted, the customer can make a claim against the plumbing company to receive compensation. Many organizations advertise that they are bonded in order to ensure clients recognize that this protection is in place.  Even airline bonds are needed.


Penal bonds are frequently considered sureties. However, there is a distinct difference between them. Specifically, penal bonds do not require a bond. It was only required that the contract include an obligee and an obligor. However, it should be noted that this type is not generally used today. It was used more frequently prior to the early nineteenth century.

Whether you need a surety or someone is asking you to play a part in their bond, it’s important to have an understanding of the kinds used in society and how they are applied in various circumstances. This knowledge ensures that, no matter what role you play in the bond, you will be able to meet your obligations and protect your interests in the agreement.


Surety meaning is money given to support an undertaking that someone will perform a duty, pay their debts, and provide a guarantee that work will be done appropriately.  We are the experts on the subject.  Let us help you with all your bonding needs.  If you have any more questions about what is the meaning of surety, please call us today. We appreciate the opportunity to earn your business, and want to be your one stop shop for all your needs.  What does bonded mean…we’ll happily explain.

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