PAYMENT BOND

PAYMENT BOND

Bond Number: [BOND NUMBER]

Effective Date: [EFFECTIVE DATE]

Penal Sum: [DOLLAR AMOUNT IN WORDS] Dollars ($[NUMERICAL AMOUNT])

PARTIES

PRINCIPAL:
[CONTRACTOR/PRINCIPAL LEGAL NAME]
[ADDRESS]
[CITY, STATE ZIP]
(hereinafter "Principal")

SURETY:
[SURETY COMPANY LEGAL NAME]
[ADDRESS]
[CITY, STATE ZIP]
(hereinafter "Surety")

OBLIGEE:
[PROJECT OWNER/GOVERNMENT AGENCY LEGAL NAME]
[ADDRESS]
[CITY, STATE ZIP]
(hereinafter "Obligee" or "Owner")

RECITALS

WHEREAS, Principal has entered into a contract with Obligee dated [CONTRACT DATE], Contract Number [CONTRACT NUMBER], for the following project:

Project Name: [PROJECT NAME]
Project Location: [PROJECT ADDRESS/LOCATION]
Project Description: [BRIEF DESCRIPTION OF WORK]
Contract Amount: $[CONTRACT AMOUNT]

(the "Contract" or "Construction Contract"), a copy of which is attached hereto as Exhibit A and incorporated herein by reference; and

WHEREAS, the Contract requires Principal to furnish a payment bond for the protection of persons supplying labor and materials in accordance with:

☐ Federal Miller Act (40 U.S.C. §§ 3131-3134) - for federal construction projects exceeding $150,000

☐ State Little Miller Act - [STATE NAME], [STATUTORY CITATION], for state/local public construction projects exceeding $[THRESHOLD AMOUNT]

☐ Private Project - as required by the Contract Documents

NOW, THEREFORE, Principal and Surety, jointly and severally, bind themselves, their heirs, executors, administrators, successors, and assigns to Obligee and all Claimants (as defined herein) for the payment of labor, materials, and equipment as set forth below.

BOND PROVISIONS

Section 1. Obligation

Principal and Surety, jointly and severally, bind themselves to pay for labor, materials, and equipment furnished for use in the performance of the Contract, subject to the following terms and conditions.

Section 2. Condition of Bond

If Principal promptly pays all persons who have supplied labor, materials, or equipment for use in the prosecution of the work provided for in the Contract, then this Bond shall be void; otherwise, it shall remain in full force and effect.

Section 3. Penal Sum

The Penal Sum of this Bond is [DOLLAR AMOUNT IN WORDS] Dollars ($[NUMERICAL AMOUNT]), which equals the Contract Amount.

Section 4. Definitions

4.1 "Claimant" means any person having a direct contract with Principal or with a Subcontractor of Principal to furnish labor, materials, or equipment for use in the performance of the Contract. The intent of this Bond is to include without limitation:

(a) First-Tier Claimants: Persons having a direct contract with Principal, including:
- Subcontractors
- Laborers employed directly by Principal
- Material suppliers contracting directly with Principal
- Equipment lessors contracting directly with Principal

(b) Second-Tier Claimants: Persons having a direct contract with a Subcontractor of Principal, including:
- Sub-subcontractors
- Laborers employed by Subcontractors
- Material suppliers to Subcontractors
- Equipment lessors to Subcontractors

4.2 "Subcontractor" means a person having a direct contract with Principal for labor, materials, or equipment.

Section 5. Claimant's Right to Sue

5.1 First-Tier Claimants (Direct Contract with Principal):
First-Tier Claimants may bring suit on this Bond without providing preliminary notice, at any time after the expiration of [90] days from the date on which such Claimant performed the last of the labor or furnished the last of the material or equipment.

5.2 Second-Tier Claimants (Contract with Subcontractor):
Second-Tier Claimants may bring suit on this Bond only if:
(a) Claimant has given written notice to Principal within [90] days from the date on which Claimant performed the last of the labor or furnished the last of the material or equipment; and
(b) Such notice states with substantial accuracy:
- The amount claimed;
- The name of the party to whom the labor, material, or equipment was furnished; and
- That the Claimant has not been paid.

5.3 Method of Notice. Notice to Principal under Section 5.2 shall be:
(a) Served by any means that provides written, third-party verification of delivery; or
(b) Served in any manner in which the United States Marshal may serve summons.

Section 6. Limitations on Actions

6.1 Federal Projects (Miller Act):
No action shall be brought on this Bond after the expiration of one (1) year from the date on which the last of the labor was performed or material or equipment was supplied by the Claimant (40 U.S.C. § 3133(b)(4)).

6.2 State/Local Projects:
No action shall be brought after the expiration of the limitations period specified by the applicable state statute or, if none, [ONE (1) YEAR / TWO (2) YEARS] from the date of final completion, acceptance, or last work performed.

6.3 Venue for Federal Projects:
Any action on a federal payment bond must be brought in the United States District Court for the district in which the Contract was to be performed and executed, and not elsewhere (40 U.S.C. § 3133(b)(3)(B)).

Section 7. Amount of Claim

7.1 Recoverable Amounts. Claimants may recover:
(a) The amount due for labor, materials, or equipment furnished;
(b) Interest at the rate specified in the Contract or, if none, at the legal rate in the project state; and
(c) Costs and reasonable attorneys' fees to the extent allowed by the applicable statute.

7.2 No Double Recovery. Any amount paid by Principal or Surety shall reduce the Penal Sum and extinguish the Claimant's right to recover such amount from Obligee.

Section 8. Surety's Obligations

8.1 Payment. Upon proper claim and proof of non-payment, Surety shall pay Claimant the amount due, subject to the Penal Sum and all defenses available to Principal.

8.2 Defenses. Surety may assert any defense that would be available to Principal against the Claimant's claim, including:
(a) Payment already made;
(b) Failure to provide required notice (for Second-Tier Claimants);
(c) Expiration of the limitations period;
(d) Defective or non-conforming work, labor, or materials;
(e) Lack of authorization for the work; and
(f) Any setoff or counterclaim.

Section 9. Limitation on Liability

9.1 Penal Sum Limit. Surety's aggregate liability under this Bond shall not exceed the Penal Sum.

9.2 Reduction. The Penal Sum shall be reduced by any payment made in good faith by Surety under this Bond.

9.3 Pro Rata Distribution. If claims exceed the Penal Sum, Surety may interplead the Penal Sum and have claims adjudicated pro rata, or pay claims in the order received until the Penal Sum is exhausted.

Section 10. Modifications and Changes

Surety consents to modifications, changes, extensions of time, alterations, and additions to the Contract without notice to Surety and without affecting the obligations of Surety under this Bond.

Section 11. No Impairment of Surety's Rights

Upon payment of any claim, Surety shall be subrogated to all rights of the Claimant against Principal and shall have rights of indemnity and contribution against Principal pursuant to the General Indemnity Agreement.

CLAIMANT NOTICE REQUIREMENTS (FOR SECOND-TIER CLAIMANTS)

Required Notice Form for Second-Tier Claimants

Second-Tier Claimants (those contracting with a Subcontractor rather than directly with Principal) MUST provide the following written notice to Principal within 90 days of last furnishing labor, materials, or equipment:

NOTICE OF CLAIM UNDER PAYMENT BOND

Date: _______________

To: [PRINCIPAL NAME]
[PRINCIPAL ADDRESS]

Re: Payment Bond Claim - [PROJECT NAME]
Contract Number: [CONTRACT NUMBER]
Bond Number: [BOND NUMBER]

Notice is hereby given pursuant to 40 U.S.C. § 3133 [or applicable state statute] that the undersigned has furnished labor, materials, or equipment in the prosecution of the work on the above-referenced project and has not been paid in full.

Claimant Information:
Name: ________________________________
Address: ________________________________
Phone: ________________________________

Nature of Claim:
☐ Labor ☐ Materials ☐ Equipment

Party to Whom Furnished:
Name of Subcontractor: ________________________________
Address: ________________________________

Amount Claimed: $________________

Description of Labor/Materials/Equipment:
________________________________

Dates of Performance:
First date furnished: _______________
Last date furnished: _______________

The undersigned certifies that the above information is true and correct.

_____________________________________
Claimant Signature

_____________________________________
Print Name and Title

REGULATORY COMPLIANCE

Federal Miller Act Compliance (40 U.S.C. §§ 3131-3134)

☐ If this Bond is for a federal construction project:
(a) This Bond is required because the Contract is for construction, alteration, or repair of any public building or public work of the United States;
(b) The Contract Amount exceeds $150,000;
(c) This Payment Bond is furnished in accordance with 40 U.S.C. § 3131;
(d) The Penal Sum equals the total amount of the Contract;
(e) Surety is authorized by the U.S. Treasury Department (Treasury Circular 570);
(f) First-Tier Claimants need not give notice before suit;
(g) Second-Tier Claimants must give written notice within 90 days; and
(h) All actions must be brought within one year of last labor/materials furnished.

State Little Miller Act Compliance

☐ If this Bond is for a state or local public project:

State: [STATE NAME]
Statutory Citation: [e.g., Texas Gov't Code § 2253.021; California Civil Code § 9550; Florida Stat. § 255.05]
Bond Threshold: $[AMOUNT]
Notice Period for Remote Claimants: [30/60/90] days
Limitations Period: [SPECIFY]
Special Requirements: [DESCRIBE]

SURETY QUALIFICATIONS

Surety represents and warrants that:
(a) Surety is authorized to transact surety business in the project state;
(b) Surety is listed on Treasury Circular 570 (if federal project);
(c) Surety has an A.M. Best rating of [A- / A / A+] or higher;
(d) Surety's underwriting limitation covers the Penal Sum; and
(e) The Attorney-in-Fact executing this Bond has proper authority.

EXECUTION

IN WITNESS WHEREOF, Principal and Surety have executed this Payment Bond under seal as of the Effective Date first written above.

PRINCIPAL:

[CONTRACTOR/PRINCIPAL LEGAL NAME]

By: _____________________________________
Name: ___________________________________
Title: ___________________________________
Date: ____________________________________

[Corporate Seal]

SURETY:

[SURETY COMPANY LEGAL NAME]

By: _____________________________________
Name: ___________________________________
Title: Attorney-in-Fact
Date: ____________________________________

[Surety Seal]

ACKNOWLEDGMENT - PRINCIPAL

STATE OF _____________ )
) ss.
COUNTY OF ____________ )

On this ___ day of __________, 20__, before me personally appeared [NAME], [TITLE] of [PRINCIPAL], who acknowledged execution of this Payment Bond.

_____________________________________
Notary Public

My Commission Expires: _______________

ACKNOWLEDGMENT - SURETY

STATE OF _____________ )
) ss.
COUNTY OF ____________ )

On this ___ day of __________, 20__, before me personally appeared [ATTORNEY-IN-FACT NAME], Attorney-in-Fact of [SURETY], who acknowledged execution of this Bond pursuant to a valid Power of Attorney.

_____________________________________
Notary Public

My Commission Expires: _______________

REQUIRED ATTACHMENTS

☐ Exhibit A: Copy of the Construction Contract
☐ Exhibit B: Power of Attorney for Surety's Attorney-in-Fact
☐ Exhibit C: Certificate of Authority (if required)
☐ Exhibit D: Treasury Circular 570 Listing (federal projects)

ATTORNEY CHECKLIST (DO NOT INCLUDE IN FINAL DOCUMENT)

☐ Verify project type: federal, state/local, or private
☐ Confirm applicable bonding statute and notice requirements
☐ Verify Surety qualifications and Treasury listing (if federal)
☐ Confirm Penal Sum equals 100% of Contract Amount
☐ Obtain valid Power of Attorney
☐ Coordinate with Performance Bond
☐ Review claimant tier requirements
☐ Verify limitations period under applicable statute
☐ Inform subcontractors/suppliers of notice requirements
☐ Obtain General Indemnity Agreement from Principal

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