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A surety bond is a contract between at least three parties: the principal, the obligee, and the surety. Through this agreement, the surety agrees to make the obligee whole if the principal defaults in its performance of its promise to the obligee. The contract is formed so as to induce the obligee to contract with the principal, i.e., to demonstrate the credibility of the principal. In more simple terms, a surety bond is a promise by a professional surety insurer to pay should the principal default or commit a wrongful act.

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