penal bond

Definition of "penal bond"
  1. An assurance agreement which requires a party to pay a specified sum if they do not fulfill certain duties, often mandatory in government contract situations
How to use "penal bond" in a sentence
  1. The construction company was required to obtain a penal bond before they could start work on the government project.
  2. If a party does not perform according to the agreed terms, the penal bond can be used to cover losses.
  3. To secure a government contract, businesses often must provide a penal bond as a safeguard against nonperformance.

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