As the term implies, a Court Bond is filed in connection with litigation by the Principal. The Principal can be the Appellant, Plaintiff, Defendant, or anyone who seeks Court intervention. A Court Bond is a guarantee required by Statute or Court Order for the benefit of another, otherwise known as the Obligee.

The most common Court bonds are:

         • Injunction or Temporary Restraining Order

         • Attachment or Replevin

         • Appeal or Supersedeas

         • Discharge Mechanic's Lien

         • Discharge Attachment, etc.

In short, a Court Bond enables the Principal to seek a remedy in Court to which s/he believes him/herself entitled, while at the same time protecting the Obligee from loss as a result of the ensuing litigation.

Once a Court Bond is filed, a vested interest is established which the obligee cannot be deprived of without his/her consent. There is, consequently, no cancellation clause permitted in Court Bonds and no statutory provision for a release of a Surety. It is irrevocably binding until all parties agree to its termination or until the case has been settled with Court approval.

Since Court Bonds offer financial protection to the Obligee, they are written very carefully. The Principal’s ability to secure the bond is determined by the underwriter’s evaluation of his/her financial status and ability. Attention is given to the Principal’s liquid assets and stockholders equity, and often, collateral is required to obtain these bonds. Presently, only Letters of Credit and sometimes certified checks are accepted forms of collateral by the Surety. Collateral is always held for the entire amount of the bond, except in the case of Appeal and Supersedes Bonds, where the collateral must include interest as well. Letters of Credit and the issuing bank must be approved by the Surety.