What legal benefits does a surety bond provide to subcontractors?
There are three basic bonds provided on a construction project: the bid bond, the performance bond, and the payment bond. The bid bond ensures that the contractor will enter into the contract for the terms of its bid and supply the required additional bonds. The performance bond ensures that the contractor will perform the contract, including paying its subcontractors and suppliers, and the payment bond provides a direct claim for subcontractors for unpaid invoices to the contractor. Each of these bonds has legal benefits to subcontractors. If a subcontractor submits a proposal to a contractor to be included in a bid, the sub wants to be sure that the contractor will enter into the contract if awarded. The bid bond encourages contractors to do just that in order to avoid having to repay losses to the surety from their failure to do so. The performance bond ensures that if the contractor defaults on the project someone else will be there with sufficient funds to see that the contractors
