surety bond

A surety bond is a three-partybondagreement involving the principal (the one who needs the bond), the obligee (the one who requires it), and the surety (the one who guarantees the principal's performance). It acts like a security deposit, ensuring that legal or contractual duties are fulfilled. If the principal fails to perform, the obligee is compensated. Surety bonds are common in fiduciary roles and in large or international 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. 

[Last reviewed in June of 2025 by the Wex Definitions Team]

Wex

• COMMERCE
• commercial activities
• finance
• financial services
• LIFE EVENTS
• financial events
• business law
• contracts
• wex definitions
• commercial transactions
• family law
• money and financial problems