Glossary of Business Credit Terms

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Appeal Bond

What is an Appeal Bond?

An appeal bond is a type of court bond taken out by a defendant seeking to appeal a ruling that has been made by a judge in a higher court. This bond, also called Supersedeas bond, are obtained by a defendant against whom a ruling has already been made. The Defendant files this bond when he/she wishes to appeal the ruling in a higher court. The bond prevents law officers from executing the judgment and guarantees that the Defendant will adhere to the ruling if it is still upheld after appeal.

How Do Appeal Bonds Work?

When a business is being tried in a court case (i.e. the business is the defendant) involving money or financial assets, there is a possibility that the business will lose the case and have to pay substantial amounts to the plaintiff. If the case is lost and the ruling is in favor of the plaintiff, the defendant may try to appeal the case in a higher court but this process would take time, within which the plaintiff could have moved in and legally obtained the assets that have been lost in the case. To avoid this occurrence the defendant would try to stay the hand of the plaintiff from obtaining the assets or properties in question by getting an appeal bond. The appeal bond guarantees that the defendant will pay the owed amount if the appeal does not turn out favorably.

The Defendant now has to take out a bond equivalent in cash value to the assets or properties involved (if it wasn’t cash already) plus interest, and the plaintiff will have to wait till the ruling of the appeal court. If the appeal is favorable to the Defendant then the money is returned to him. If it is not, the bond pays the Plaintiff.

Some businesses, especially small or medium enterprises, do not always have the money to finance such bonds. In cases like these, the business may turn to a third party to help finance the bond. This third party acts as a guarantor for the business, ensuring that the bond amount will be paid should it ever come to that. If the time comes to pay and the business cannot afford to, the third party, usually an insurance company, bank or other financial institution, will step in to pay on behalf of the company. The company is then legally obligated to reimburse the third party.

The third party is called a Surety, the Defendant is called the Principal, and the Plaintiff is called the Obligee. An appeal bond does not necessarily have to be between the defendant and a Surety. A Surety only comes in if the defendant cannot afford to provide the bond amount.

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