surety bond
Definition
Formal, legally enforceable contract between a first party (the principal or obligor), a second party (the customer or obligee), and a third party (the surety, such as a bank, bonding company, or insurance company) whereby the surety guarantees payment of a specified maximum sum, or to otherwise compensate (indemnify), the obligee against damage or loss caused by the actions (or a failure to perform) of the obligor.
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