Bond Violation

AAA

DEFINITION of 'Bond Violation'

A breach of the terms of a surety agreement. A bond violation occurs when a surety bond, which protects one party against a financial loss caused by the other party's failure to perform, fails to meet the conditions of the agreement. For example, the owner of a shopping center who hires a contractor to perform a seismic retrofit of the building might require the contractor to purchase a surety bond. If the contractor's work fails to bring the building into compliance with current earthquake construction codes as stipulated in the surety bond, the contractor has failed to perform and thus committed a bond violation.

INVESTOPEDIA EXPLAINS 'Bond Violation'

In the event of the bond violation in this example, the surety company would pay the shopping center owner for this loss and the surety company would then collect that sum from the contractor. The surety bond guarantees that the shopping center owner gets his or her money even if the contractor can't pay. The surety arrangement reduces the shopping center owner's risk and makes him or her more willing to hire the contractor.

RELATED TERMS
  1. Continuous Bond

    A financial guarantee commonly used in international trade that ...
  2. Bond Purchase Agreement

    A legally binding document between a bond issuer and an underwriter ...
  3. Dim Sum Bond

    A bond denominated in Chinese yuan and issued in Hong Kong. Dim ...
  4. Convertible Bond

    A bond that can be converted into a predetermined amount of the ...
  5. Bond

    A debt investment in which an investor loans money to an entity ...
  6. Corporate Bond

    A debt security issued by a corporation and sold to investors. ...
Related Articles
  1. Investing

    What Happened To Obama’s Amnesty Bill?

    The sweeping Republican majorities were supposed to trigger change, but now they are preparing to embrace the Obama immigration policy.
  2. Economics

    What Is Happening To The BRIC Economies?

    Ten years ago, it was about the BRIC countries –Brazil, Russia, India, and China, and it was thought that capitalizing their resources would elevate them.
  3. Options & Futures

    Options -- Accessing Stakes In Apple At Less Cost

    Finding Apple stock costly to trade? Here are multiple ways to trade it through low-cost Apple options.
  4. Trading Strategies

    Risk Management Techniques For Shorting Call Options

    Shorting covered calls is a popular options trade strategy. Here are the methods to mitigate the risk/loss and enhance profits for selling covered calls
  5. Credit & Loans

    Best Credit Cards For 2015

    The best credit card for you depends on your financial goals. Our choices for the best cards in 4 different categories.
  6. Insurance

    Avoid The No-Health-Insurance Penalty By Feb 15

    If you don't have health insurance, act NOW or you could owe penalties on your 2015 taxes, in addition to this year's.
  7. Stock Analysis

    How CVS Grew Into a Drugstore Giant

    Want proof that brick-and-mortar businesses aren't dead? Just look at this company.
  8. Investing

    What's a T Bond?

    Treasury bonds, or T-bonds, are marketable securities issued by the US government, and are available in increments of $100. Bonds have a maturity range of ten to 30 years, with 30 being the most ...
  9. Professionals

    Retirement Bliss? Not So fast: When Savings Lag

    Most people aren't saving enough for retirement. Here are some tips savers and financial advisors can use to change that.
  10. Fundamental Analysis

    What's a Prospectus?

    The Security and Exchange Commission (SEC) requires that any company raising money from potential investors through the sale of securities must file a prospectus with the SEC and then provide ...

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center