Performance bonds are issued to one party of a contract as a guarantee against the failure of the other party to meet obligations specified in the contract specifications. It is also referred to as a contract bond. A performance bond is usually provided by an insurance company to make sure a contract or completes their contractual obligations.
Payment Bonds, often referred to as labor and materials payment bonds, provide a guarantee to the Project Owner or General Contract or that all bills will be paid for labor and materials under the contract. The surety is obligated for any unpaid items. Often times, the payment bond will cover the obligated costs even if no payment is received by the obligee. Further, the payment bond issued will also filter down to second, third and in some states fourth and fifth tier vendors.
We are ready to help, if you have questions about performance and payment bonds, why they are needed, or how you can secure one for your next project. Just give our office a call for more information today!