What is the primary function of a contract bond?

The primary function of a contract bond is to ensure the principal performs the contract terms. This type of bond serves as a guarantee that the contractor will fulfill their obligations as outlined in the contract. If the contractor fails to meet these obligations, the surety company backing the bond will step in to cover the financial loss that the project owner might incur as a result of the contractor's default.

This mechanism not only protects the project owner but also reinforces the contractor's commitment to delivering the project according to the agreed-upon specifications, deadlines, and conditions. By providing this security, contract bonds create a layer of trust in the contracting process, which is essential in construction and other related industries.