Bond Law and Legal Definition

Bond in the context of law refers to a formal contract to repay at fixed intervals the amount borrowed with the interest. It is a deed that imposes an obligation upon the obligor, his/her heirs, or executors to pay a certain sum of money to another person on a day fixed in the deed. In finance, bond is a debt security in which the person issuing the bond owes a debt to the holder of such bond. Such debt must be discharged according to the term of the bond on the attainment of maturity. Therefore, a bond is like a loan in which the issuer is the borrower and the holder is the creditor. Bonds provide the borrower with external funds to finance long-term investments. In the case of government bonds, it provides funds to finance current expenditures.

Generally, bonds are secured by a mortgage. Therefore, a bond is a written obligation made by the owner of a real property to repay a loan under the specified terms.

The following is an example of a state statute defining the term bond. According to Va. Code Ann. § 19.2-119, a "Bond" means the posting by a person or his surety of a written promise to pay a specific sum, secured or unsecured, ordered by an appropriate judicial officer as a condition of bail to assure performance of the terms and conditions contained in the recognizance.