What is a Surety or ‘Guarantee’ bond?

A surety bond is sometimes referred to as a ‘guarantee bond’, or ‘contract guarantee’.

Guarantee bonds are provided by Guarantors (an Insurance Company), to the Employer or Beneficiary, on behalf of the Bonded principal, or Contractor.

The bond will usually guarantee the performance of the Contractor, under the contract in place between the Contractor and Beneficiary. This type of bond is often referred to as a Performance Bond.

However, the use of the bond varies according to which bond is issued. Performance bonds are predominantly in place to protect the Beneficiary against the insolvency of the Contractor, and ensure that the Contractor fulfils their obligations under the contract.