Penal Bonds

A penal bond is a bond that requires the obligor to pay a specified sum as penalty if the underlying obligation is not performed.  A penal bond is also termed a penal bill, common-defeasance bond, or conditional bond.  Payment of the penalty in such a bond is often required in government contracts.  The penal bond is conditional when the obligor undertakes for him/herself, his or her heirs, administrators, or executors to pay a certain amount of money on the condition that on performing a specific act the obligation is void or the obligor stipulates that the obligation remains as such and in full force when the obligor performs a specific act or fails to perform such act.  In the context of a penal bond, a bond is the instrument which legally binds a party to perform a specific act.

A bond assumed as an official bond and not conditioned by statute shall be considered good as a common-law bond, even though not enforceable as a statutory bond.  For a bond to be enforceable as a common-law obligation, it must have been voluntarily executed.

Where acknowledgment of a bond is statutory, such requirement cannot be waived by the obligee.  Where a statute provides that bonds relating to real estate shall be executed, acknowledged, and recorded in the same manner as deeds, it is not mandatory that such bonds shall be executed, acknowledged, and recorded in that manner.  Since bonds are treated as contracts, a consideration is essential for a common-law bond to be enforceable.

If an obligee is not named in the body of the instrument but the party to whom the bond is payable is clear , then such obligation shall not be void.  When the obligors have affixed their signatures to the bond as witnesses to perform certain covenants and conditions, it will suffice to bind the obligors.

A surety who affixes a signature on a bond is bound by such bond and his belief about the genuineness of the forged name does not lessen his/her liability.  Statutes that require a bond as a condition of some step, judicial proceeding, the exercise of a privilege, or to secure the performance of duties of the principal obligor, also require that such bond be executed with one or more sureties.  A bond procured by fraud, duress, misrepresentation, mistake or undue influence shall not be enforceable.

Inside Penal Bonds