Indemnity Bond

Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority and you can order it here)

A written instrument under seal whereby the signer, usually with his or her surety or bondsman, guarantees to protect another's loss by guaranteeing completion of the terms of the contract.  Indemnity bonds are an acknowledgment of an obligation to make good the performance by another of some act, duty, or responsibility.  Indemnity bonds are usually issued by companies that assume risk of performance by a bonded party for a fee.  Performance of the act, duty, or responsibility by the bonded party discharges the obligation.  The bonding company retains right of subrogation against the bonded party.  Fidelity bonds protect an employer against losses sustained by dishonest employees by guaranteeing faithful performance of duties by employees.  Performance bonds such as construction bonds guarantee a builder's obligation to complete construction.  In such a contract, the bonding company can be held liable for damages but not for specific performance.

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