Texas General Lines — Property and CasualtySurety and BondsMedium
A local government agency requires a contractor to obtain a bond guaranteeing that all laborers, subcontractors, and materialmen involved in a public works project will be paid. This ensures that these parties do not file liens against the public property. What is the specific name for this type of bond?
- APayment Bond
- BCompletion Bond
- CMaintenance Bond
- DPerformance Bond
Show answer & explanationAnswer & explanation
Correct answer: A. Payment Bond
A Payment Bond guarantees that the principal (contractor) will pay all subcontractors, laborers, and material suppliers involved in the project. This prevents liens from being filed against the property, especially important for public projects where liens are often not permitted.
Why the other options are wrong
- B. A Completion Bond guarantees the project or specific improvements will be finished.
- C. A Maintenance Bond guarantees the quality of the work for a period after completion.
- D. A Performance Bond guarantees the contractor will complete the work, not pay others.
Payment Bond
A surety bond that guarantees subcontractors, laborers, and material suppliers will be paid by the contractor.
- Protects third-party claimants (subcontractors, suppliers).
- Prevents liens from being filed against the project owner's property.
- Often required in conjunction with a Performance Bond on public projects (Miller Act).
Memory trick: Contract Bonds: Pay, Perform, or Bid?