Obligacions

Obligacions is a Catalan term that can refer to two related but distinct notions: civil obligations and financial obligations (debt securities).

In civil law, an obligació is a legal relationship in which one party, the debtor, is required to perform a specific act or refrain from acting in favor of another party, the creditor. Obligacions may arise from contracts, from quasi-contracts (such as unjust enrichment), from delicts, or from law. They typically consist of the debtor’s duty to perform and the creditor’s right to demand that performance; the object of the obligation must be possible and lawful, and usually is determined or determinable. Breach may trigger remedies such as damages, specific performance, or contract termination. Obligacions can be transferred or assigned, and may be extinguished by payment, novation, or other legal mechanisms.

In finance, obligacions denote debt securities, i.e., bonds, by which issuers borrow funds from investors. An obligació creates a claim by the holder on the issuer for repayment of principal and, typically, periodic interest payments (coupons) until maturity. Issuers can be governments, municipalities, or corporations. The terms are defined in an issue document and governed by securities law. Prices and yields vary with interest rates, credit quality, and market conditions. Common features include coupon rate, maturity date, denomination, redemption terms, and covenants. Bonds are traded in capital markets, and investors face credit risk and interest-rate risk.