What is a Payment Bond Claim and How Do You Make One?

{"version":"0.3.0","atoms":[],"cards":[],"markups":[["a",["href","https:\/\/www.aiacontracts.org\/contract-documents\/25131-general-conditions-of-the-contract-for-construction"]],["u"],["a",["href","https:\/\/www.aiacontracts.org\/contract-documents\/183791-payment-bond"]],["i"],["strong"]],"sections":[[1,"p",[[0,[],0,"May 4, 2022"]]],[1,"p",[[0,[],0,"If you\u2019re a construction professional, you have probably\nheard the term \u201cpayment bond.\u201d A payment bond is a three-way agreement between\na principal obligor (usually a contractor or subcontractor), obligee (usually\nan owner or upper-tier contractor), and the surety. Generally, when a principal\nobligor fails to pay its subcontractors or suppliers, the payment bond requires\nthe surety to fulfill its bonded principal\u2019s payment obligations to these\nsubcontractors or other persons supplying labor and materials. "]]],[1,"p",[[0,[],0,"In order for subcontractors and suppliers to receive the\nbenefit from a contractor\u2019s payment bond, they usually must file a claim for\npayment under the bond. But how exactly is this done? Here are 3 steps that you\ncan follow when asserting a payment bond claim. "]]],[1,"p",[[0,[],0,"1. \nObtain a Copy of the Bond."]]],[1,"p",[[0,[],0,"First, you should obtain a copy of the payment bond. Subcontractors\nand suppliers are usually permitted to request a copy of the bond from the\nprincipal obligor. In fact, some parties may be contractually required to\nfurnish a copy of the bond upon request. For example, AIA Contract Documents requires\ngeneral contractors and subcontractors to furnish a copy of the payment bond at\nthe request of a potential beneficiary. Specifically, Section 11.1.3 of the "],[0,[0],1,"A201-\n2017 General Conditions of the Contract for Construction "],[0,[1],1," "],[0,[],0,"states:"]]],[1,"p",[[0,[],0,"\u00a7 11.1.3\nUpon the\nrequest of any person or entity appearing to be a potential beneficiary of\nbonds covering payment of obligations arising under the Contract, the\nContractor shall promptly furnish a copy of the bonds or shall authorize a copy\nto be furnished."]]],[1,"p",[[0,[],0,"If your project uses the A201, subcontractors and suppliers\nshould make a written request to the bonded principal for a copy of the payment\nbond. This written request should also include a reasonable timeframe for a\ncopy of the bond to be provided to the requesting party, such as 3 to 5 days. Be\nsure to retain a copy of your written requests in case you do not receive an\nadequate response."]]],[1,"p",[[0,[],0,"2. \nUnderstand the Terms of the Bond."]]],[1,"p",[[0,[],0,"Once you have obtained a copy of the payment bond, be sure\nto thoroughly read through and understand it. You should consult with an\nattorney when doing this. Payment bonds usually contain important definitions\nand terms regarding action that must be taken by the claimant and the bonded\nprincipal. For example, under "],[0,[2],1,"A312-2010\nPayment Bond"],[0,[],0,", \u201cClaim\u201d is defined as a written statement by the claimant including,\nat a minimum, (1) the claimant\u2019s name, (2) the name of the claimant\u2019s customer\nfor whom labor was done or materials were furnished, (3) a copy of the\nunderlying agreement or purchase order, (4) a description of the labor,\nmaterials, or equipment furnished, (5) the date of the claimant\u2019s last\nperformed work, (6) the total amount earned by the claimant for its work as of\nthe date of the claim, (7) the total amount that the claimant has been paid,\nand (8) the total amount due and unpaid to the claimant for work as of the date\nof the claim. Claimants must adhere to the definition of \u201cClaim\u201d under the\nterms of the bond when submitting a payment bond claim to the surety."]]],[1,"p",[[0,[],0,"Additionally, payment bonds usually contain a description of\nthe surety\u2019s obligations. For instance, payment bonds may detail when the surety\u2019s\nobligation to make payment arises, limits on the surety\u2019s payment obligations,\nand how the surety\u2019s obligations may be paid, such as from the remaining\nconstruction contract funds. "]]],[1,"p",[[0,[],0,"3. \nPrecisely Follow the Terms of the Bond."]]],[1,"p",[[0,[],0,"Finally, make sure you follow every provision set forth\nwithin the bond. Payment bonds usually contain particular instructions that\nclaimants are required to follow in order to make a proper claim. This may\ninclude that a claim be made on a specific form, include certain information,\nor be sent to an individual at a specified location. You should consult with an\nattorney to ensure you are complying with the terms of the bond when asserting\na payment bond claim."]]],[1,"p",[[0,[],0,"If your project uses the A312, claimants are required to\nfollow a particular procedure when submitting a payment bond claim. As\nmentioned above, claimants must comply with the definition of \u201cClaim.\u201d Additionally,\nif the claimant does not have a direct contract with the general contractor, it\nmust provide a written notice of non-payment to the contractor, stating the\namount claimed and the name of the party to whom work was performed, within 90\ndays after having last performed the work included in the claim. Additionally, claimants\nmust send a claim, as defined by the bond, to the surety at the address set\nforth in the bond. For claimants having a direct relationship with the contractor,\nthey are required to have sent a claim, as defined by the bond, to the surety\nat the address set forth in the bond. Be sure to properly document and retain\ncopies of your compliance with the bond procedures when submitting a claim to a\nsurety."]]],[1,"p",[[0,[],0,"In all, ensuring that you make a proper bond claim is a\nvital step in receiving payment for unpaid work on a project from a surety\nunder a payment bond. If you fail to follow the claims procedure or other\nrequirements set forth in the bond, you may risk having your claim denied by\nthe surety. "]]],[1,"p",[[0,[3,4],2,"AIA Contract Documents has provided this article for\ngeneral informational purposes only. The information provided is not legal\nopinion or legal advice and does not create an attorney-client relationship of\nany kind. This article is also not intended to provide guidance as to how\nproject parties should interpret their specific contracts or resolve contract\ndisputes, as those decisions will need to be made in consultation with legal\ncounsel, insurance counsel, and other professionals, and based upon a multitude\nof factors. "]]]]}