This is not pure insurance. A contract of suretyship/bond or guarantee is an accessory agreement, by which one person binds himself for another already bound. It is in the nature of a collateral engagement to pay the debt of another or to see that another pays or performs, as distinguished from an original and direct agreement for the party’s own act, and is accessory to a principal obligation contracted by another person.
An essential part of the contract is that there will be a subsisting obligation of a principal debtor. Without a principal there is no surety. Before a contract of suretyship can exit, the principal must be under a legal performance obligation. There are various types of bonds namely: Bid Bonds; Performance Bonds; Labour and Materials Bonds; Advance Payment Bonds; Maintenance Bonds; Supply Contract Bonds; Licence and Permit Bonds; Court Bonds and Government Bonds.