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An agreement (not an insurance policy) by which the person or insurance company (known as the Surety) guarantees or agrees to be responsible for certain acts or performances which one party is undertaking to perform for another. the person for whom the work is being done is known as the obligee and the person who is required to perform the work is the principal. E.g. A contract bond in which an insurance company as surety guarantees owners of the building under construction (the obligee) that the contractor (Principal) will have sufficient money etc. to perform their undertaking under the contract.