Payment bond
A type of surety bond that guarantees subcontractors and suppliers will be paid for work performed under a contract.
The payment bond protects project owners from claims if the contractor fails to pay subcontractors or suppliers. Payment bonds also provide a safety net for subcontractors and suppliers, ensuring they receive payment even if the contractor defaults. They are crucial in mitigating payment risks and maintaining trust in the contractual relationship, especially in large projects.
Used in a sentence
A payment bond guarantees that subcontractors and suppliers will be paid for their work if the contractor defaults.
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