A surety bond is defined as a three-party agreement that legally binds together a principal who needs the bond, an oblige who requires the bond and a surety company that sells the bond. The bond guarantees the principal will act in accordance with certain laws. If the principal fails to perform in this manner, the bond will cover resulting damages or losses. Although they often go unnoticed, surety bonds play a major role in countless industries across America. If you’re reading this article, you’ve probably heard about surety bonds but are still confused about their exact purpose. You’re not alone. Even those required by law to be bonded frequently misunderstand surety bonds.