Louisiana Bail Bonds Practice Exam

Which term describes the obligation of the surety to pay if the principal defaults?

1. Indemnity

2. Penal sum

3. Surety bond

4. Judicial liability

The correct answer is: Penal sum

The term that describes the obligation of the surety to pay if the principal defaults is the penal sum. The penal sum refers to the specific amount that the surety agrees to pay should the principal fail to meet their obligations under the bond. This amount serves as a financial guarantee that can cover the potential losses incurred by the obligee due to the principal's non-performance or default. Indemnity refers to the compensation for losses or damages, which is broader and not specifically about the surety's obligation in the context of a bond. A surety bond itself is a contractual agreement involving the surety, principal, and obligee, but it is not the term that specifically addresses the surety's financial responsibility when a default occurs. Judicial liability pertains to the responsibility that arises through judicial decisions or court orders, which does not directly relate to the surety’s obligation to pay in the context of bonding agreements.