Who is referred to as the Principal in a bond agreement?

In a bond agreement, the Principal is the party that has agreed to fulfill the obligation outlined in the bond. This term refers specifically to the individual or entity that is responsible for performing a task or service, and is essentially the one being bonded.

In the context of surety bonds, the Principal is the party whose performance is guaranteed by the surety. For example, if a contractor is obtaining a performance bond for a construction project, the contractor is the Principal, as they are the one obligated to complete the work as per the contract. The bond serves as a financial guarantee to the obligee, typically the project owner or government entity, that the Principal will meet their contractual obligations.

The other parties mentioned do have significant roles in the bond agreement: the obligee is the entity that benefits from the bond, the guarantor is the surety that backs the Principal's obligation, and the bonding agency issues the bond—but it is the Principal that holds the primary responsibility for completing the agreed-upon work or obligation.