Reviewed September 7, 2026.
General Obligations Law § 5-322.1(2) generally voids a provision in a bond issued in connection with a construction contract that conditions a subcontractor's or material supplier's payment-bond claim or lawsuit on exhausting another legal remedy first.
The statute is not limited to clauses requiring exhaustion of every possible remedy. A requirement to complete another collection action before proceeding on the payment bond can raise the statutory issue. The section also contains an insurance-contract and workers' compensation exception that should be considered where relevant.
Preserve the bond claim separately
A contractor's bankruptcy or an unpaid judgment against the contractor should not be assumed to be a prerequisite to a covered bond claim. At the same time, this rule does not erase otherwise applicable notice, claimant-eligibility or suit requirements.
Review the bond, any incorporated contract, the type of project and the governing law promptly. Coordinate contract, lien, trust and bond remedies so that pursuing one does not allow another deadline to expire.
Kushnick Pallaci PLLC assists clients throughout New York with payment-bond enforcement and defense. Contact 631-752-7100 or vtp@kushnicklaw.com.
Attorney Advertising. General information, not legal advice.
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