Surety bonds provide financial guarantees that contracts and other business deals will be completed according to mutual terms. Surety bonds protect consumers and government entities from fraud and malpractice. When a principal breaks a bond’s terms, the harmed party can make a claim on the bond to recover losses.
Commercial bonds are typically purchased by companies and working professionals who need surety bonds for purposes unrelated to legal issues, construction projects or other contracted work. Most commercial bond types are used to reinforce laws – most commonly license and permit regulations.
Contract bonds can be used for many reasons, however, they are most commonly used in the construction industry to ensure projects are completed according to contract – one of the reasons the two terms are used interchangeably.
Most court proceedings require that certain parties post surety bonds to limit the potential for the financial loss that could result from judgments. “Court Bond” is an overarching term that includes bonds used for a number of different court proceedings.
License and permit bonds, are a specific type of commercial bonding. These bonds are required by government agencies to specify that business owners in certain industries must purchase these bonds before they can be legally licensed.