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What is a Payment Bond?

Payment Bonds

performance bond application

A payment bond is a type of bond that is a contract bond. As a part of an underlying contract, the Obligee (the owner of the property) will require that a payment bond be obtained by the Obligor. The payment bond makes sure that the subcontractors and all material vendors get paid. A payment bond is provided by the surety and can be called upon in a given timeframe, such as 90 days after the job is completed. If there is a claim, the surety will review the claim to see if it is valid. If the claim is valid (such as if a subcontractor was not fully paid on the job), then the claim will be paid by the surety and the surety will then go against the Obligor to repay the payment bond that the surety paid on.

In most places a payment bond is given at the same time as a performance bond. These can commonly be called a performance and payment bond, or P&P bond (or P & P bond).

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