Payment Bonds

Payment bonds are usually issued in conjunction with a performance bond.  A payment bond guarantees to the project owner that the bonded contractor will pay its subcontractors and material suppliers connected to this project.  A payment bond requirement will prevent unpaid subcontractors and suppliers from filing mechanic’s liens against the project.

The payment provision will often provide protection to second and possibly third tier claimants; i.e. subcontractors and suppliers of subcontractors.  This will be specifically spelled out in the bond form.