Penal Bond .December 30, 2020
A penal bond is a written instrument executed between an obligor and an obligee designed to secure the performance of a legal obligation through the in terrorem effect of the threat of a penalty for nonperformance.
The penal bond with conditional defeasance (hereinafter referred to as a conditional bond, conditional penal bond, or penal bond) first arose in England during the 1340s/1350’s. The conditional bond has been characterized as the dominant method for “framing substantial contracts in the later medieval and early modern periods.” In fact, during the Tudor Period, actions of debt were the most numerous single class of actions in the Common Pleas rolls (and would continue to be so for the next 300 years)
What is the penal sum of a bond :
The penal sum is the maximum amount that can be paid out on a surety bond claim. For example, if a claim was made against a $20,000 Residential Contractor License & Permit Bond, $20,000 is the maximum amount that any one claimant could bhe paid.
Who is the obligee on a bond :
In a bonding situation, this is the party that requires and receives the protection of the bond. For example, under a performance bond, the obligee is the project owner for whom the bonded contractor is required to perform the specified work.