Insurance & LiensQuestion 1478 of 1605
On many private commercial projects, the direct contractor furnishes a 'payment bond.' The primary purpose of a contractor's payment bond is to:
a.Protect the owner against defective workmanship
b.Guarantee the project will be completed on schedule
c.Reimburse the owner's financing costs
d.Guarantee payment to subcontractors, laborers, and material suppliers who furnish work
Explanation
A payment bond (Civil Code §8600 et seq.) guarantees payment to subcontractors, laborers, and suppliers. A performance bond, by contrast, guarantees completion/quality. The payment bond gives lower-tier claimants a surety to pursue in addition to (or instead of) lien rights.
Law Reference: Civ. Code §8600Practice all 1605 questions free — no signup required.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)