Bond - the concept defined

Last updated: December 2020 | 3 min read

The defined concept:

Butterworth’s Encyclopedia of Forms and Precedents defines a ‘bond’ as a deed whereby one person binds himself to another for the payment of a specified sum of money either immediately or at a fixed future date or whereby several people bind themselves jointly or jointly and severally to one or more persons to the same effect.

Bond may be for payment of penalty or liquidated damages. An agreement to pay a pre-existing liability under a document or any law by installment or otherwise is not a bond.

Form of Bonds:

A bond is also another form of contract. Bonds are of two types generally:

  • Ordinary Bond;
  • Security Bond.

The Stamp Act defines ‘Bond’:

  • Any instrument whereby a person obliges himself to pay money to another on condition that the obligation shall be void if a specified act is performed or is not performed as the case may be;
  • Any instrument attested by a witness and not payable to order or bearer, whereby a person obliges himself to pay money to another; and
  • Any instrument attested whereby a person obliges himself to deliver grain or other agricultural produce to another.
  • An agreement containing simple obligation to pay money may be a ‘bond’ though it is not attested.

Bond is an instrument in which the obligation to pay certain sums is created expressly and not impliedly. A bond, thus has two parts, one – creating obligation and the other laying down the condition.

Types of Bonds (Source – The Indian Stamp Act)

  • Administrative Bond is one of those prescribed for use in circumstances governed by Succession related laws, and hence guided by High Court rules in standard forms without a reason or need for drafting samples;
  • Ordinary or Common Bond is the one as discussed above;
  • Bottomry Bond is a mortgage of the ship and the cargo of a sea going vessel by the master. The enforcement may be through arrest and sale of ship;
  • Customs Bond is given for payment of Custom or Excise Duty and to prevent evasion thereof. Used in prescribed formats, hence not a subject matter of drafting and formatting precedents;
  • Indemnity Bond is a document of Indemnity. In an indemnity bond, the amount of liability is not ascertained; indemnity is in the nature of damages and can be for an indefinite period;
  • Respondential Bond is an instrument for securing a loan availed against the cargo of a ship;
  • Security Bond is a document generally executed by a surety to secure due performance of a contract. The person bound to perform is different from the person executing the bond.
  • Security Bond is executed when a person guarantees the payment of somebody else’s money or liability and not his own.


Bond should be signed and executed in the presence of independent witnesses, who may be acquainted with the person executing the bond.


It is not mandatory to register a bond unless it is affecting an immoveable property. It is though advisable that the Bond when executed must be certified.

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