When a contractor is drawing up a contract of $30,000 or more, they are required to obtain a payment bond in Arizona. This bond is a type of surety bond because it ensures the contractor’s subcontractors and all material suppliers will be paid once the work on the contract has been completed. It is important contractors living in the state of Arizona are fully aware of the laws for these payment bonds so they will be in compliance.
A payment bond forms a contract between the owner, contractor, and the surety. Payment bonds are rarely obtained without a performance bond. When obtaining this type of bond, the contractor must obtain it from the surety company. The surety company is one that is licensed by the Insurance Department in the state the bond is being issued. In this bond, the contractor promises the contract will be followed and executed under the very specific terms that are laid out in the contract. When the surety signs the bond, they are agreeing they will pay all subcontractors and the material suppliers of the contractor, should the contractor fail to follow through on the contract.
When a contractor has a payment bond, they are reassuring all parties working with them they will be paid. This bond often helps to encourage working partnerships because all parties can feel more comfortable in taking the risk in the partnership of the contract. When a contractor supplies a bond, the surety takes on the responsibility of answering to any claims that may be filed as a result of the contractor failing to perform their obligations. If a claim is filed with the surety, they have sixty days to respond and take action on the claim.
Contractors who are working in the state of Arizona must obtain a Payment Bond in Arizona. Small contracts do not require a bond but contracts that reach higher amounts do. Those who are in need of obtaining these bonds should browse our website. Purchasing from the right surety will help to ensure the process is carried out legally so the contractor has met all Arizona state requirements.
