Surety bond

A suretyship bond is a contractual agreement between three parties: (i) the principal, (ii) the obligee, and (iii) the surety. Through this agreement, the surety agrees to make the obligee whole if the principal defaults in his performance of an obligation 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.

Suretyship bonds originated hundreds of years ago as a mechanism through which trade over long distance could be encouraged.

In 2001, a new type of suretyship bond called a Sure-T bond was announced. Protecting Internet auction (e.g., eBay) users in the case of default by a bidder or seller, the Sure-T bond further extends the reach of suretyship bonds in encouraging long-distance trade.

See: Co-signing