Which bond guarantees that subcontractors will be paid for labor and materials expended on the contract?

Which 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)

A payment bond guarantees that subcontractors and material suppliers will be paid for the labor and materials they provide on the project. It works by backing the prime contractor with a surety; if the contractor doesn’t pay, those who supplied labor or materials can claim against the bond, and the surety will pay eligible amounts up to the bond’s value. This protects the project owner from liens and helps keep the project moving by ensuring funds reach those who contributed to the work. This is different from a fidelity bond, which protects the employer from dishonest acts by employees; a performance bond, which ensures the contractor will complete the project according to the contract terms; and a bid bond, which guarantees the bidder will enter into a contract and obtain the required bonds if awarded.

A payment bond guarantees that subcontractors and material suppliers will be paid for the labor and materials they provide on the project. It works by backing the prime contractor with a surety; if the contractor doesn’t pay, those who supplied labor or materials can claim against the bond, and the surety will pay eligible amounts up to the bond’s value. This protects the project owner from liens and helps keep the project moving by ensuring funds reach those who contributed to the work.

This is different from a fidelity bond, which protects the employer from dishonest acts by employees; a performance bond, which ensures the contractor will complete the project according to the contract terms; and a bid bond, which guarantees the bidder will enter into a contract and obtain the required bonds if awarded.