Bonds and who secures them
My question is mostly geared to Payment Bonds and who actually pays for them and holds the tile to said bond. And if they are also the same thing as a surety bond, just as an interchangeable name.
I understand that the GC would get the Bid Bond, as a form of bid security in lieu of a certified check. I know that the GC would also get a performance bond, if requested by the owner or is a public project, that guarantees that the GC would be able to carry out the work if something happened such as bankruptcy or some other GC related disaster.
Payment Bonds are used to pay the sub-contractors if they are not receiving payments on complete or portions of the work already carried out. But is it on the Owner that secures this bond? and if so do then they get billed by the bond provider (surety)? and how is this different from a surety bond, if at all?
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If payment bonds are required by the owner, it would be preferred to have A312 - Payment Bond as a supplementary form filled out between the owner and contractor. This way the owner is aware of the limitations of the payment bond, who the surety is...etc.
I think "surety bond" can be used to refer to a payment bond, however, I think payment bonds are specific to contractor having funds to pay suppliers and sub-contractors. So it protects the owner from a mechanics' lien in the case that a subcontractor / suppliers isnt paid. Performance bonds are specific in regards to a contractor being able to execute the project as called for by the documents.
Bid bonds are only active during bidding - in that they warrant that if a contractor retracts from the stipulated agreement, either the next bidder can be awarded (but not more than a sum delineated on the bond itself). AIA has bid bond forms
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