Surety Bond
Contract by which one party agrees to make good the default or debt of another. Actually, three parties are involved: the
principal, who has primary responsibility to perform the obligation (after which the bond becomes void); the
surety, the individual with the secondary responsibility of performing the obligation if the principal fails to perform. (After the surety performs, recourse is against the principal for reimbursement of expenses incurred by the surety in the performance of the obligation, known as
surety’s right of exoneration); and the
obligee, to whom the right of performance
(obligation) is owed.
Dictionary of Insurance Terms. Copyright © 2008 by Barron's Educational Series, Inc. All rights reserved.
