surety bond

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Sometimes, when a party owes others legal duties, the party posts a surety bond to guarantee their performance. The surety bond is like a security deposit, with the party promising to do something as the renter and person they owe obligations to, or obligee, is like the landlord. Thus, if the party that made the promise fails to perform their duty, the obligee is compensated out of the bond. 

Surety bonds are most frequently used to secure fiduciary relationships, and international, large, or complex transactions . For example, many jurisdictions require guardians to post a surety bond before formally taking responsibility for their wards. Similarly, a company making a large purchase from a foreign supplier might require the supplier to post a surety bond.