A contract bond is a bond which is created to complete the contract as per the bond. This bond ensures the obligee that the contractor will complete the contract as stated in the bond. It is a guarantee statement given by the contractor about his performance of his contract. Here in this contract their three people involved to it. Namely the principal, the obligee and the surety. It is a surety bond which covers both the payment of labor and material and also the performance of the contract. If the contractor fails to perform his obligation then the contractor will be sued in the court of law for break of the contract. The insurance company takes the responsibility of paying to the insurer up to the limit of the construction bond. Then the insurance company asks the insurer to reimburse.
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