Legal Dictionary of Pakistan

payment bond.

A bond given by a surety to cover any amounts that, because of the general contractor's default, are not paid to a subcontractor or materialman. "[T]he bond serves two purposes: it assures the owner a lien-free project, and it induces suppliers and subcontractors to accept work on the project, perhaps at a lower price, because of the assurance that they will be paid. Since no additional charge is generally made for a payment bond when a performance bond is being purchased, the two are usually issued simultaneously." Grant S. Nelson, Real Estate Finance Law § 12.2, at 881 (3d ed. 1994).