Bonding
A guarantee by a surety company that a principal (e.g., a contractor or employee) will fulfill certain obligations or perform a job according to agreed-upon terms
Detailed Explanation
Bonds protect the obligee (the party requiring the bond) against financial loss if the principal fails to carry out their obligations.
Practical Example
A construction company needs to obtain a performance bond before starting a large public project. This bond assures the government agency overseeing the project that the construction company will complete the work as promised.
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