What is the difference between a performance bond and a payment bond?
A. Performance Bonds Under a performance bond, the surety or bonding company undertakes to guarantee the faithful performance by a general contractor of its obligations to a construction project owner pursuant to an underlying building contract between the owner and the general contractor. IF THE GENERAL CONTRACTOR DEFAULTS ON ITS OBLIGATION TO DELIVER A COMPLETED BUILDING OR STRUCTURE TO THE OWNER IN SUBSTANTIAL COMPLIANCE WITH THE CONTRACT REQUIREMENTS, THE SURETY WILL BE REQUIRED TO COMPLETE – OR PAY FOR COMPLETION OF – THE PROJECT, IN PLACE OF THE GENERAL CONTRACTOR. B. Payment Bonds Under a payment bond, the surety undertakes to guarantee payment of the subcontractors and suppliers on a building project if the general contractor fails to pay them. IF A GENERAL CONTRACTOR OR A SUBCONTRACTOR DOES NOT PAY ITS SUBCONTRACTORS OR SUPPLIERS, THEN THE UNPAID SUBCONTRACTORS OR SUPPLIERS WHO ARE COVERED UNDER THE PAYMENT BOND ARE ENTITLED TO PAYMENT BY THE SURETY. C. Combined Performance an
