Bonds, like all other financial instruments, are subject to certain standards. In fact, commercial law demands that any document or instrument must contain seven essential elements in order to be valid. If any of these elements is missing the paper is commercially defective, void, or expressly fraudulent. These essential elements are: 1) Accurate identification of the parties to the instrument, contract, or dispute; 2) Nature and content of the allegations or claims set forth with particularity; 3) Ledger — ie, accounting of the remedy or relief sought as recompense or compensation for specific wrongs or contractual violations or defaults, 4) Surety — ie, identification of the property sought or person pledged as the stakes over which the dispute occurs, and to be forfeited to the prevailing party to pay the debt. 5) Facts and law — ie, specific laws violated and facts set in evidence by exhibit; 6) Certification — ie, statement under oath by party asserting an allegation or claim that everything asserted is “true, correct, and complete,” whether criminal or civil; A bond, whether government or private, must contain certain essential elements still. Bond is defined by Black’s 7th as “[a] written promise to pay money or do some act if certain circumstances occur or a certain time elapses, a promise that is defeasible upon a condition subsequent.” In addition to the amount promised, the amount payable to the surety is called the premium (ie, the percentage of the total amount of the promise, charged by the surety to the principal as a one-time cost of guaranteeing the bond). The basic and general features are: 1) A fixed sum of money must be promised: 2) It must be payable at a definite time, and 3) It must be payable with stated interest. The only necessary parties to an ordinary private bond are: 1) the Principal (ie, the person making the confession of debt — the maker of the bond), and 2) the Obligee (ie, the person to whom the promise is made — the holder of the bond). AMERICAN JURISPRUDENCE GUIDE FOR DRAFTING PRIVATE BONDS: 1) Name and address of the principal: 2) Name, address, domicile, and financial qualification of surety: 3) Name and address of obligee; 4) Amount of bond (fixed or unlimited, ie listing the items making up the amount); 5) Obligating language (eg, heirs, executors, successors and assigns, joint and several, several but not joint, etc.); 6) Reason bond is given; 7) Condition of the bond (underlying obligation, general conditions to recovery on bond, prerequisites to recovery (eg, notice, period to cure defects or default, determination by arbitration or by experts of defect or insufficiency, method of curing defects of defaults]); 8) Scope of indemnification (loss or damage, liability); 9) Duration 10) Termination (ie, terms regarding the option of ending the obligation); 11) Limit of time for bringing action on bond (eg, statute of limitations), 12) Recovery of legal costs and attorney’s fees in action on bond; 13) Date of bond 14) Signatures of parties; 15) Acknowledgments (before witness or notary), and 16) Delivery and acceptance to obligee (or surety in the event of surety bond). The usual order in which the elements appear in a bond are: the obligation or promise to pay: the condition, if any, and the “testimonium clause;” and the signatures and acknowledgments. The bond premium is usually set forth in the document as well, in the form of a percentage. Consult the templates included in the FORMS folder of this A bond and a promissory note are of the same species. Basically, a promissory note is a promise to pay a fixed sum, with or without interest. So long as there is a promise to pay in the letter, even if it’s a love letter, it is a promissory note. It really is the simplest of negotiable instruments, so they can generally be explained through bonds. In the case of a contract surety bond, there are many forms prescribed and precompleted. The contract surety bond is the most common form used in contractor situations such as construction and other services where loss prevention is of paramount concern. As Principal in such a bond you will have to pay premium (ie, the percentage of the actual bond coverage). The premium is usually calculated according to a pre-qualification process, which, as Surety, you must use in order to evaluate the risks involved in standing surety for the debt: 1) Capacity to perform (ie, Principal’s ability to complete the contract agreed upon); 2) Capital (ie. Principal’s ability to pay the debt including the interest on the obligation); and 3) Character (ie, Principal’s business ethics, credit history, etc., in order to determine likelihood of default).