Payment & Performance Bonds Construction Law Attorney
When contractors successfully win contract bids, they generally must procure payment and performance bonds to cover the project they’re about to undertake. Payment bonds guarantee to the subcontractors, suppliers, and laborers hired by the contractor that they will receive payment for services and materials, while performance bonds guarantee to the owner that the contractor will perform according to contracted conditions and state regulations. At Davis Bucco, our construction law attorneys assist clients in obtaining payment and performance bonds, and we’re here to handle any payment and performance issues encountered by businesses, contractors, and subcontractors.
How Payment & Performance Bonds Work Together
A payment bond promises subcontractors, suppliers, and laborers they will be paid for their work and materials. A performance bond protects the owner from the contractor defaulting on their obligations. Because the payment bond makes it the contractor’s responsibility to pay workers, it also ensures the owner won’t be on the hook for paying workers if they’re not compensated. In this way, both the payment bond and performance bond protect owners and are issued alongside each other, especially on federal or state projects. The surety company that underwrites the bid bond on a construction project generally underwrites the payment and performance bonds as well.
Claims against Payment & Performance Bonds
The claims process against payment and performance bonds can be complex and go through many stages. Once an owner, subcontractor, supplier, or laborer alleges contractor default or nonpayment, the contractor’s surety company will investigate the claim, and depending on whether the contractor admits or refutes having defaulted, the surety must determine if there is an actual case against the contractor. Based on the results of its investigation, the surety may decide not to engage at all if it finds no obligation to step in and cover or compensate the alleged default.
On the other hand, if the surety company determines the contractor has, in fact, defaulted or failed to pay workers, it must take the necessary actions to fix the situation. To compensate an owner, the surety is obligated to finish the project within the limits of the performance bond. To compensate subcontractors, suppliers, and laborers, the surety must pay those who have not been paid by the contractor. Then, the contractor is responsible for repaying the surety company for its backing.
Talk to an Experienced Construction Law Attorney about Pennsylvania Payment & Performance Bonds
For legal advice and representation regarding payment and performance bond matters, please contact the Pennsylvania construction law attorneys at Davis Bucco in Conshohocken, PA. We represent contractors, subcontractors, and business owners throughout the mid-Atlantic.