Why does an owner require the general contractor to furnish BOTH a performance bond and a payment bond?
Explanation
The performance bond protects the obligee against non-completion; the payment bond protects subcontractors, laborers, and suppliers, and so protects the owner indirectly from claims against the property — and under Civil Code §8600 an owner who files the direct contract and records a payment bond of at least 50 percent of the price before work begins may have lien enforcement restricted to the bond. (a) confuses security for performance with the contract that creates the obligation. (c) reverses cause and effect: bonds are underwritten on the contractor's credit and do not reduce insurance premiums. (d) is a separate statutory duty under B&P §7125 and Labor Code §3700.
Law Reference: Civ. Code §8600 / §8608This topic, taught in full in the CSLB Law & Business guide. CSLB Law & Business — Complete Study Guide (2026) — PDF + EPUB, $24.99 · 14-day refund →
Practice all 1632 questions free — no signup required.
Own the complete CSLB Law & Business guide — PDF + EPUB, $24.99 →
Related questions on this topic
- Compared to a mechanics lien, a key ADVANTAGE of a stop payment notice for a lower-tier claimant is that it:
- A certificate of insurance shows a policy in force for a full year, but the insurer cancelled that policy the following week. The holder's coverage is:
- On a private remodel with no notice of completion recorded, the owner moves in and all labor stops. The 90-day lien clock runs from:
- In a hold-harmless agreement, the 'indemnitor' is the party that:
- Why serve the preliminary notice at the start of a project, when payment is still arriving on time?
- Which statement about surety bonds is TRUE?
Last reviewed: · editorial process