Surety bond is a guaranteed bond issued by the principal to the obligee, where he ensures that he compiles with the words entered in the contract. The main purpose of issuing surety bond is to indemnify the losses occurred due to unforeseen act or default act of the principal. All surety bond guarantees the obligee that the principal will compiles with the terms and conditions of the contract. It also ensures the performance of the obligator as per words. Mostly surety bonds are used by the contractors of construction industry. Surety bonds are issued by the contractors to the owners or the subcontractors.

Contractors issue surety bonds to the owner by guaranteeing that he completes the contract has specified and also guarantees the subcontractor regarding payments for the material and labor supplied. In all such cases, the contractors enter into contract prior to issuance of bond. When the principal fails either in performance of completion of contract or in payment for labor and material supplied, he can be sued in the court of law. In case of default not only the principal is sued, but also the surety can also be sued against law. At the time of non performance of contract, the owner can ask the principal either to pay the claim for the damages or ask him to complete the contract.

In case the principal fails, the surety can also be called for his performance of contract. It is the duty of the surety to pay compensation or claim to the obligee for non performance of the contract by the principal. Therefore helps to find remedy to the owner or the obligee in case of default. When the principal tries to make default act, the surety bond protects the obligee against the default act. Either the principal or the surety is to perform the work specified without any loss suffered by the obligee. So, from this point we can easily understand that surety bond always helps to find remedy to the obligee.