What type of bond ensures one party answers for the debt or default of another party?

A surety bond is a contractual agreement involving three parties: the principal, the obligee, and the surety. It ensures that the surety will fulfill the obligations of the principal if that principal defaults or fails to meet their contractual commitments. This type of bond is commonly used in various contexts, such as construction projects, where the contractor (the principal) must complete the work as per the contract terms. If they default, the surety will step in to cover the obligations, protecting the obligee from potential losses.

This mechanism is crucial in providing assurance to the obligee that the obligation will be met even in the event that the principal fails to do so. Other types of bonds listed, such as performance bonds or contract bonds, typically are subsets of surety bonds but do not encompass the broader principle of ensuring that one party answers for the obligations of another in the same general manner. As the key function of a surety bond is to hold the surety responsible for the debt or default of the principal, it stands out as the correct choice.