Nolo's Plain-English Law Dictionary
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- (1) A written agreement purchased from a bonding company that guarantees a person will properly carry out a specific act, such as managing funds, showing up in court, providing good title to a piece of real estate, or completing a construction project. If the person who purchased the bond fails at his or her task, the bonding company will pay the aggrieved party an amount up to the value of the bond. The bonding company often requires collateral (by placing a lien on the purchaser's real estate), and if it has to pay out on the bond, it will sell the collateral to cover its loss. (2) An interest-bearing document issued by a government or company as evidence of a debt. A bond provides predetermined payments at a set date to the bond holder. Bonds may be "registered" bonds, which provide payment to the bond holder whose name is recorded with the issuer and appears on the bond certificate, or "bearer" bonds, which provide payments to whomever holds the bond in-hand.