BOND. See MASONRY and Bumnixa.
BOND (same word as band, a fastening, from the verb to bind ; for the meaning compare obli gation, similarly used). In a legal sense, an obligation in writing and under seal by which one party, termed the obligor, hinds himself to pay a sum of money to another. termed the obligee. At the present day a contract under seal to perform any other act or duty is gen erally called a covenant. Bonds to the class of specialty contracts and are of two kinds, simple and conditional, the former where provision is made for the payment of a sum of money only, the latter where a clause is added, in the nature of a defensance, upon the performance of which the obligation is void, hut upon the breach of which the obligation, regarded in the nature of a penalty, is payable. The latter is the class to which the term bond is generally applied in modern usage. In form it consists of: (1) The (obligation by which the obligor binds himself, his heirs, executors, and administrators, to pay a certain sum of money; (2) any recitals necessary to explain the trans action; (3) the conditions, defining the acts on the performance or breach of which the obligation terminates. In an ordinary surety's bond, or one for the payment of a debt, the obliga tion is for a sum double the amount of the debt, hence called a 'penalty,' but terminates on the payment of the debt with interest by the debtor. Formerly, the condition was often stated in a separate instrument called the 'defeasance.' Under the old common-law- rule on non-perform ance of the condition of a bond on the day fixed, the penalty was absolutely forfeited and recov erable by the obligee in full.but equity intervened to give relief against such penalty on the pay ment of the sum or damages actually sustained with interest due. and later statutes CI mlined the recovery at law to the debt or II:images actually suffered, so that now a bond amounts merely to the promise of payment of a sum of money, its form being sanctioned by antiquity. One of the great advantages of a bond over an ordinary contract. to pay money is that the period fixed by the of Rmitations, in most jurisdic tions. in which to bring action is 20 instead of tl years. Where the obligation runs to more than one obligee, all should join in a suit. unless their rights are expressly declared to be several.
In the United States a bond or like obligation to pay money is usually aceompanied by an instrument of security or mortgage upon the property of the debtor or obligor. On default the obligee may either sue upon the bond or enforce the payment from the security. A simi lar usage prevails in the Scotch and English law; in the former. the mortgage of real estate being commonly termed a bond. See MORTGAGE.
Bonds issued by corporations and by govern ments are evidences of indebtedness which Ilitrer in form but little from those used in legal transactions by individwls. Corporations are generally empowered by their charters to bor row money by the issue of bonds. These bonds have a definite period to run and bear a fixed rate of interest. The entire bond issue is fre
quently reinforced by a mortgage upon the prop erty of the corporation, under which the bond holders may. upon default of payment of prin cipal or interest, foreclose upon the property in satisfaction of their claims. This right greatly enhances the value of the security in the case of first mortgage bonds, hut is of little prac tical value in the second and subsequent mort gage bonds so frequently issued by railroad cor porations. The number of bonds issued by cer tain corporations is bewildering. Some depart very widely from the first mortgage bond, and are bonds only in name. and in the fixed rate of interest which they bear. Any obligations issued in a group by corporations arc called bonds when they bear a fixed rate of interest. The entire bond issue is divided into part ob ligations each of which is a bond. They are usually issued in sums of $1000 each, though bonds of $500 and $100 are sometimes issued. In form they are either registered et coupon bonds. In the former ease they are issued to individual owners, who in ease of sale must authorize the transfer on the books of the corpo ration or its trustee to the purchaser. Coupon bonds are payable to bearer. and provide for the payment of interest by a series of notes (cou pons) attached to the bond, which promise the payment of the interest, usually expressed as a specific son of money. at the several interest periods. As they fall due they are cut from the bond and presented directly or through a hank for payment. They may be payable at the com pany's offices or at banking institutions named on the coupons.
Bonds issued by governments are in form simi lar to those issued by corporations, hieing regis tered or coupon bonds. They are not, however, supported by any mortgage, as no citizen can enforce a claim against the State. For their security they rest, therefore, upon the confidence of the purchaser in the ability and good inten of the issuing government to meet its obli gations. In the ca-c of some of the minor gov ernments this confidence has been sometimes sadly misplaced. In the case of refusal by the government to pay the debt or interest the holder is without redress. In some of the States of the Union the issue of bonds by the State govern ments is hedged about by constitutional restric tions, which have a certain value in preventing excessive bond issues. The same is true of the bonds issued by the minor civil subdivisions of the States. comities, school districts, towns, and cities. Sec articles lour, Puemc; VON.
Consult: Treatise on Stock and Stock holders (3 ed.. Chicago, 1894) ; Short. Lair of Railway Bonds and Mortgage (Boston. 1897) ; Rainer, Modern Lame of Municipal Securities (Indianapolis, 1S98) ; Dillon, Law of Municipal Bands (Saint Louis, 187G); Throop, Treat i SO on the Line Relating to Public Officers and Sure tics in Official Bonds (New York, 1892). Also the authorities referred to under the articles FORECLOSURE; MORTGAGE; TRUST; MUNICIPAL ITY.