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Enforcing a payment or performance bond

On Behalf of | Dec 12, 2023 | Construction Law

If you are in the construction industry, you might be aware that project owners can require a construction payment bond or a construction performance bond. They are usually addressed as part of the contract between the project owner and the construction contractor performing the work.

Payment and performance bonds

Payment and performance bonds are surety bonds. They are used to ensure that a project is fully completed.

A payment bond guarantees that the construction contractor will pay its subcontractors, workers and suppliers and that the project owner will not be financially responsible for those payments if the construction contractor does not pay. If that happens, the company that issued the bond will pay any money owed.

A performance bond guarantees that the construction contractor will finish the project according to the quality standards and performance expectations outlined in the contract. If these obligations are not met, the company that issued the bond will pay the project owner so that they can use another contractor to complete the work.


If the project owner needs to enforce a payment or performance bond, they will need to review the bond documents and notify the contractor of the enforcement action. Then, they can file a claim with the payment bond company with details about why they are filing the claim, how much they are owed and any other information to support the claim.

Usually, the bond company has a limited time to respond. If they do not pay the claim, it may be necessary to file a lawsuit.