Contract bonds are a type of surety bond used in the construction industry to ensure that contractors fulfill their obligations as outlined in a contract. These bonds protect project owners by guaranteeing that the contractor will complete the work according to the agreed terms, including quality and timelines. If a contractor fails to meet their obligations, the bond provides financial compensation to the project owner. This helps to mitigate risks associated with construction projects, ensuring that funds are available to hire another contractor or cover any additional costs incurred due to the default.