The one thing that everyone wants when a job here in Illinois is completed is payment in full. Certain provisions and terms are built into most construction contracts to make sure that happens. One of those terms often involves payment bonds.
Payment bonds are used in order to make sure that everyone gets paid at the end of a project. A contractor, owner and surety form a contract that does just that for everyone, including general contractors, subcontractors, material suppliers and laborers. When people are paid, an owner is left with a property free from liens.
Of course, the contractors involved must agree that they will complete the work they agreed to do. Most contractors use the AIA A312-2010 Performance Bond. This bond ensures payment by making the surety follow through with its obligations regardless of whether the owner does. It limits notice obligations and lengthens response times for the surety when a claim is made.
Payment bonds are popular in government-funded projects since mechanic’s liens cannot be filed on those projects. In private contracts, either method could work. However, mechanics liens do not leave the owner with a free and clear property.
Construction contracts function just as other contracts do in that they require an offer, acceptance and consideration. When it comes to ensuring the consideration is taken care of, contractors here in Illinois and elsewhere have more than one option. The parties may decide that a payment bond would be the better way to go since the owner and the contractors each receive benefits in the end. The owner ends up without liens, and the contractors and others get paid.