Why is the term bond used to describe surety bonds and receivership bonds?
My understanding of a bond is that it’s a loan you give and then collect with interest.
A receivership bond is money someone puts up to insure against damages from a receiver improperly carrying out his duties. Isn’t that more like collateral? Or does the term “collateral” apply only to property and “bond” applies to sums of money?
So why is the term bond used for things like surety bongs, receivership bonds, or bail bonds?
Bonus question. When a surety or a receiver “posts a bond”, are they giving someone money, or are they merely executing a contract promising to give someone money in the event there is a failure to preform some obligation?
In the criminal system, a bond is an amount of money you put up as part of a promise to return to court. If you fulfil your side of the bargain, you get the money back. If you put up the money yourself, it’s called a cash bond.
If you don’t have enough to pay the full amount, you can hire someone, a bail bondsman, to do it for you. Bail bondsmen charge a fee for the service. The fee is non-refundable. Bondsmen don’t actually pay the bond themselves; instead they fill out some paperwork promising to pay if you don’t come to court. Bondsmen, therefore, have a financial interest in making sure you’ll appear. (If you don’t, they may come looking for you.) The paper they fill execute is called a surety bond. (The bondsman is there to insure the money gets paid.)
A personal bond is a promise to appear in court. If you don’t, you’re personally responsible for the amount of the bond.
Anyway, if you pay a cash bond, you’re actually delivering money upfront.
Otherwise, either you, or your bondsman, are promising to pay money if you don’t show up.
A bond is basically a promise. Either to pay some money in the future (corporate bond) or to show up in court (surety bond) or to do the work you’ve promised to do (receivership bond).
Etymologically, the word “bond” is related to “band” and describes a variety of legal relationships between two persons, creating obligations between the two. This aspect can be seen in all of the examples of “bonds” that you mention, even though the meaning of a debenture that carries a promise to repay the principal plus interest has become the most common one nowadays.
A “bond” is a tie and by extension an obligation. The bonds that tie the US and the UK. And by further extension an obligation to pay.
Because it was meant to differentiate from shares. A regular loan and bonds are not exactly the same thing. A bond is more like a share except that bonds have guaranteed return which shares do not.
The various meanings of the word “bond” (a security that certifies monetary claims under a loan, and a moral tie between people such as “the bond of marriage”) of this 1918 Charlie Chaplin silent comedy, which was meant as a propaganda to promote Liberty Bonds to fund the American war effort.
A Receiver Surety Bond is a court surety bond required by courts in certain jurisdictions. A receiver is a person appointed by a court to secure the assets, property, and control of a company or entity that is a party to a lawsuit pending final decision. The company whose assets are seized is said to be in receivership, which is considered to be an extraordinary remedy and is not always consented to by the owner of the property. The Receiver is required to obtain a bond to guarantee their faithful performance of the duties and obligations of the receivership. Should a plaintiff obtain a judgment against the receiver for a failure in the performance of her/his duty as a receiver, the plaintiff may be entitled to recover from the surety on the bond.
Because a bond issued by a corporation is typically secured in some way against the corporation’s assets, so that even if the corporation gets into financial trouble, the bond-holder has some expectation of being re-paid, greater than someone who had loaned money to the corporation without security.
And then there is Preferred Stock, which is considered stock from a balance sheet perspective but is associated with a fixed dividend that doesn’t differ a whole lot from a bond coupon. It’s sort of weird. Banks issue these a lot because they allow it to treat what is essentially a loan as stockholders’ equity, helping them meet required capital ratios to keep the regulators off their backs. If you can dream it up, some corporation has issued it.