Bond Law

What Are the Laws Affecting Bonds?

Bonds are defined as a written obligation by which one party promises to perform a certain act, like appearing in court, paying a financial obligation, or performing some other contractual responsibility. Bonds are also a trade instruments of debt issued by institutions to finance their activities.

Investment Bonds

In investing, a bond is a debt security in which the one who purchases a bond is, essentially, lending money to a government, municipality, corporation, federal agency or other entity who issues the bond. In return for the bond purchaser's money, the issuer provides the bond, which is nothing more than a promise to pay a specified rate of interest during the life of the bond and to repay the face value (sometimes called the “par value”) of the bond after a certain date (i.e.,when it “matures”).

There are many types of investment bonds, such as U.S. government savings bonds, municipal bonds, corporate bonds, mortgage- and asset-backed securities, federal agency securities, and foreign government bonds. Investment bonds are also sometimes called bills, notes, debt securities, or debt obligations.

Surety Bonds

In certain types of transactions, particularly construction projects, one may be required to provide a form of insurance that they will perform the duties of the contract by a certain date or in a certain way. Bonds are that insurance, and usually take the form of bid, performance, and payment bonds. Bid bonds ensure that one does not underbid a project or, if they have, that they will be able to complete the project at the price bid. Performance bonds ensure timely and accurate performance of the construction contract to the specifications. Payment bonds ensure that a contractor pays its subcontractors and materialmen and is designed to protect the owner of a project from liability to same in the event of nonpayment.

Bail Bonds

Another type of bond is the one used to guarantee that someone will return to appear in court in a criminal matter. A defendant, or the defendant's family, friends, or a professional bail bond agent, executes a document promising to forfeit a sum of money determined by the court to be sufficient to guarantee the defendant's return to court to stand trial (the “bail”). Should the defendant fail to appear, the court keeps the money secured by the bond (sometimes known as “estreature” of the bond).

Because most defendants would not be able to afford to pay their own bail, they seek assistance from a bail bondsman, or bail agent, who, for a nonrefundable fee that usually equates to about 10-20% of the bail amount, posts bail. Should the defendant fail to appear, the bail agent becomes liable for the full amount of the bail bond. If a defendant fails to appear in court when required, the court will issue a warrant for the defendant's arrest for "jumping bail," and the amount of the bond will be forfeited to the court. The bail agent is then usually authorized to track down the defendant and bring him or her back to court for criminal proceedings in order to obtain a refund of the bond. This is often accomplished through the employment of bounty hunters.

For more information about the various types of bonds, please visit the resources found below. Additionally, you may find an attorney in your area to assist you with your legal needs by visiting our Law Firms page.


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