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.

BREAKING DOWN '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. Surety

    The guarantee of the debts of one party by another. A surety ...
  2. Maintenance Bond

    A type of surety bond purchased by a contractor that protects ...
  3. Associate In Fidelity And Surety ...

    A designation earned by bond producers, bond underwriters, and ...
  4. Performance Bond

    A bond issued to one party of a contract as a guarantee against ...
  5. Contractors Professional Liability ...

    Liability insurance that provides coverage to contractors and ...
  6. Warehouse Bond

    A type of financial protection that assures an individual or ...
Related Articles
  1. Investing

    Tips For Dealing With A Renovations Contractor

    It pays to take the time and choose the right contractor for your next big home renovation project.
  2. Small Business

    Should You Hire Contractors or Employees for Your Small Business?

    Learn the pros and cons of hiring independent contractors instead of regular full-time employees. Find out about a potential risk for severe tax penalties.
  3. Managing Wealth

    How Not To Get Scammed By Contractors

    Home improvement is a $200 billion a year industry. This means a lot of people get into the field that are likely less than qualified.
  4. Investing

    Top 6 Home Renovation Scams To Avoid

    Renovations are stressful, but if you rush through important details you could fall prey to one of these scams.
  5. Taxes

    The Purpose Of The W-9 Form

    Businesses use IRS form W-9 to gather information from vendors they hire as independent contractors.
  6. Taxes

    The Purpose of the W-9 Form

    The W-9 form provides key data your clients need if you're an independent contractor. Just be sure you're not really an employee who should fill out a W-4.
  7. Investing

    How To Choose The Right Bond For You

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  8. Investing

    The Basics Of Bonds

    Bonds play an important part in your portfolio as you age; learning about them makes good financial sense.
  9. Investing

    Investing in Bonds: 5 Mistakes to Avoid in Today's Market

    Investors need to understand the five mistakes involving interest rate risk, credit risk, complex bonds, markups and inflation to avoid in the bond market.
  10. Investing

    An Introduction to Individual Bonds

    Individual bonds are better than bond funds and can be a key component to one’s investment strategy.
RELATED FAQS
  1. Under the Uniform Securities Act, a broker-dealer is generally required to obtain ...

    The correct answer is c. The correct answer is $10,000. While the Act states that the Administrator may set the amount, the ... Read Answer >>
  2. Under the Uniform Securities Act, registration requirements for an investment adviser ...

    The correct answer is a) Investment advisor representatives do not need to include a minimum amount of net capital since ... Read Answer >>
  3. Under the USA, registration as an IAR includes all of the following EXCEPT:

    Under the USA, registration as an IAR includes all of the following EXCEPT: A. Minimum net capitalB. Passing a qualification ... Read Answer >>
Hot Definitions
  1. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  2. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
  3. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  4. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
  5. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
  6. The Bernie Madoff Story

    Bernie Madoff ran a multibillion-dollar Ponzi scheme that is considered the largest financial fraud of all time.
Trading Center