Labor and Material Bond

Definition

A bond, secured by the general contractor, which guarantees that the costs for labor and materials for the project will be paid. Not to be confused with a performance bond.

Purpose

The Labor and Material Bond ensures that subcontractors, suppliers, and laborers are paid for their contributions to a construction project, even if the general contractor defaults. This protects project owners from liens and ensures that the project can continue without financial disputes.

Examples of Use

• Construction projects: Used in large-scale construction projects to secure payment for all labor and materials.
• Public works: Commonly required for public works projects to ensure that taxpayers' money is used responsibly.
• Private developments: Used in private sector developments to protect against non-payment issues.

Related Terms

• Performance Bond: A bond that guarantees the completion of a project according to contractual terms.
• Payment Bond: Another term often used interchangeably with Labor and Material Bond.
• Surety Bond: A general term encompassing various types of bonds that provide financial security and assurance.

Notes

• Labor and Material Bonds are typically required by law for public projects.
• They provide peace of mind to subcontractors and suppliers, ensuring payment for their services and materials.
• The cost of the bond is generally a percentage of the total project cost and is included in the project budget.