While different states have different laws and regulations pertaining to payment bonds, there are several common facets of this area of the law that apply.
Payment bonds are a common issue that contractors face in today's large construction projects. Simply stated, payment bonds are payment guarantees for subcontractors. They are contracts between general contractors and insurance companies, usually for a predetermined amount, to guarantee payment on work performed by the subcontractors who provide labor, materials, supplies and equipment on a project. The existence of a payment bond becomes critical when the general contractor or a subcontractor goes out of business, files for bankruptcy, or otherwise fails to pay its subcontractor.
While different states have different laws and regulations pertaining to payment bonds, there are several common facets of this area of the law that apply. Similarly, surety and insurance companies include varying provisions in their contracts, yet there are certain elements that will always exist.