Payment bond: Guarantees that subcontractors will be paid for labor and materials expended on the contract.

Payment bond: Guarantees that subcontractors will be paid for labor and materials expended on the contract.

• A. Payment bond
• B. Fidelity bond
• C. Performance or completion bond
• D. Bid bond

Answer: (A)

Payment bonds protect subcontractors and suppliers by guaranteeing they will be paid for labor and materials used on the project. If the contractor defaults or fails to pay, the surety covers the outstanding amounts up to the bond limit, ensuring the job can continue and avoiding payment disputes that could halt work. This bond is commonly required on public projects and works alongside a performance bond to provide broader protection to those who supply work for the contract. The other bonds serve different purposes: a fidelity bond covers losses from employee dishonesty, a performance or completion bond guarantees the project will be finished according to the contract, and a bid bond ensures the bidder will honor their bid and enter into the contract if awarded and obtain the necessary bonds.

Payment bonds protect subcontractors and suppliers by guaranteeing they will be paid for labor and materials used on the project. If the contractor defaults or fails to pay, the surety covers the outstanding amounts up to the bond limit, ensuring the job can continue and avoiding payment disputes that could halt work. This bond is commonly required on public projects and works alongside a performance bond to provide broader protection to those who supply work for the contract. The other bonds serve different purposes: a fidelity bond covers losses from employee dishonesty, a performance or completion bond guarantees the project will be finished according to the contract, and a bid bond ensures the bidder will honor their bid and enter into the contract if awarded and obtain the necessary bonds.