A payment bond is a contract between three parties among the surety, the principal, and the obligee. Payment bonds protect employees, and subcontractors, who are employed and provide legal recourse when contractors do not hold the agreement. Subcontractors, suppliers, and workers can file a claim on the compensation of an underwriting obligation if the contractor does not pay as promised. In the construction industry, the payment bond and performance bond are usually issued together with a surety bond in Oklahoma so that they are closely linked, although these two bonds differ from each other.

Comparison between Payment Bond and Performance Bond

You may get confused with payment and performance bonds, but they are distinct. A performance bond makes sure that the contractor fulfills the contractual tasks. In contrast, a payment bond ensures payment and the completion of work without being vulnerable to labor obligations for those working on the project. In short, the work will be done according to the terms of the contract while the payment bond is paid to material suppliers and workers. In other words, the payment bond is a surety bond that guarantees the work done in Oklahoma.

The Need for a Payment Bond

In support of a public work contract, the payment bond works. The majority of projects offered publicly require payment and performance bonds. The payment bond ensures that all suppliers and subcontractors are paid. Private jobs can also require a payment bond since intelligent developers want a lien-free project guarantee.

Many project lenders may also demand a payment bond from a general contractor as the Bank has the interest to ensure that a project is completed in a good-standing manner. Finally, many general contractors are forced to provide payment obligations to subcontractors. Should a contractor fail to pay its subcontractors and suppliers, even though the contractor has already been paid, the general contractors would be obliged to make these payments.

Keep in mind that the issuer of the contract, not the party provider of the bond, is protected by this bond. If a payment bond is incurred, the party who provided that bond should repay the bond for the loss of that bond, including reasonable charges incurred by the bond.

The way you get your bonds is straightforward. You must first receive your payment bond quote. You can get a quote from our surety bond experts in Oklahoma. You may have to submit additional documentation depending on the amount of your bond. The process is relatively rapid for smaller bond amounts, while large obligations require somewhat longer before issuance.

Call us at Carpenter Insurance if you have questions. Our experts will be able to answer your questions and know everything about performance and payment bonds.