Navigating Surety Performance and Payment Bonds: What To Know
There are many misconceptions about what these obligations are.
April 06, 2021 at 11:45 AM
8 minute read
Real estate developments and construction projects regularly require payment and performance bonds from contractors that are seeking to be hired for a project. There are many misconceptions about what these obligations are. The purpose of the payment and performance bonds is to mitigate the project owner's risk.
The plain language of a performance bond requires the surety to take over a project and arrange for the completion of the work in the event of a contractor termination or abandonment of a project.
Likewise, a payment bond guarantees that the subcontractors, vendors and suppliers on a project get paid by the general contractor. This protects the owner from subcontractors walking off the job and the potential for liens and delays or refusals to deliver materials to the job site.
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