In surety bond terminology, what is a 'bonded contract'?

A 'bonded contract' refers to a contract that is backed by a surety bond. When a contractor enters into a bonded contract, it means they are providing a guarantee to the project owner (the obligee) through a surety that the obligations stipulated in the contract will be fulfilled. If the contractor fails to meet these obligations, the surety will step in to fulfill the contract or compensate the obligee, ensuring that the project is completed as agreed.

This backing of the contract by a surety provides assurance and financial security to the obligee, as it mitigates the risks associated with contractor default. The surety effectively acts as a third-party guarantor, allowing the obligee to proceed with confidence in the contractor’s performance.

The other options do not accurately represent the specific nature of a bonded contract. While a contract may not require collateral, have penalties, or specify a completion date, these characteristics do not define the unique bond backing provided by a surety bond itself.