Surety

A surety is a formal undertaking in which an individual or entity (the surety) agrees to be liable for the debt, duty, or contractual performance of another party (the principal) should that party fail to meet their obligations. This legal arrangement offers security and assurance to the creditor or obligee, ensuring that contractual terms are honored even in the event of default by the principal.

Example: In a loan transaction, if the borrower (principal) fails to repay the debt, the guarantor (surety) is legally bound to make the payment to the bank. Similarly, in construction projects, a surety bond guarantees that the contractor fulfills the agreed-upon work.