PAYMENT BOND

A Payment Bond, also known as a Labour & Material Payment Bond, is issued by the surety at the request of the contractor, or "principal", who must provide a Payment Bond when signing a new job contract. This bond provides security to sub-contractors and suppliers, guaranteeing that they will be paid according to the terms agreed upon in their contracts.

Owners request Payment Bonds because subcontractors and suppliers can provide better pricing on contracts with them in place because they eliminate the risk of non-payment.