Legal Definitions - collateral act

Definition: A collateral act is any action, usually not involving the payment of money, for which a bond or recognizance is given as security.

Examples:

• Performing a service for someone and providing a bond as security in case the service is not completed.
• Leasing a car and providing a bond as security in case the car is damaged or not returned.
• Signing a contract to complete a construction project and providing a bond as security in case the project is not completed.

These examples illustrate how a collateral act works. In each case, the person providing the service or taking on the responsibility provides a bond as security. This bond acts as a guarantee that the person will fulfill their obligation. If they fail to do so, the bond can be used to cover any damages or losses incurred by the other party.