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Surety bond

Surety bond Definition

A three-way agreement between a surety company, a contractor and the project owner. If the contractor fails to comply with the contract, the surety assumes responsibility and ensures that the project is completed. By law, prime contractors to the federal government must post surety bonds on federal construction projects valued at $25,000 or more. Many state, county, city and private-sector projects require bonding as well.

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