Construction Bonds Explained: Payment, Performance, Bid and Lien Bonds

Reviewed September 7, 2026.

Construction bonds serve different purposes. Obtain the executed instrument and identify the principal, surety, protected parties, covered contract and claim conditions before relying on one.

• Payment bonds protect eligible unpaid labor or material claimants. Coverage and notice requirements depend on the bond and governing law; they do not automatically protect every contractual tier or eliminate all lien rights.
• Performance bonds address the contractor's covered default. Notice, owner performance, termination and the surety's contractual options may matter. A surety does not necessarily have to hire a replacement contractor immediately.
• Bid bonds secure specified bidding obligations, commonly execution of the awarded contract and furnishing required bonds. The solicitation determines when they are required.
• Maintenance or warranty bonds address specified post-completion obligations for the period and conditions stated in the bond.
• Lien-discharge bonds substitute security for a lien when the governing statutory requirements are met. Under Lien Law § 19(4), the private-improvement undertaking is generally 110% of the lien and must be filed and served as prescribed. The bond amount differs from the premium charged to obtain it.

A bond is not a guarantee of immediate payment. Preserve notices and enforcement deadlines while investigating the underlying claim.

Kushnick Pallaci PLLC assists clients throughout New York with construction surety and bond disputes. Contact 631-752-7100 or vtp@kushnicklaw.com.

Attorney Advertising. General information, not legal advice.

Surety Liability and the Face Amount of a Lien-Discharge Bond

Reviewed and updated September 7, 2026. This case note concerns a December 29, 2009 decision.

In Casa Redimix Concrete Corp. v. Cosner Construction Corp., 68 A.D.3d 673 (1st Dept. 2009), the court distinguished the contractor's debt from the surety's obligation under a lien-discharge bond.

The bond limited the surety's liability

The trial judgment awarded the subcontractor $261,197.60 plus $162,879.96 in prejudgment interest, together with costs and disbursements, against the contractor and surety. The Appellate Division reduced the surety's liability to the bond's $288,000 face amount.

The court explained that the undertaking limits the surety's liability, with interest potentially running from the surety's own default. Because the surety was not in default here, prejudgment interest on the contractor's debt could not increase the surety's liability above the bond amount. The procedure for seeking an additional undertaking also did not expand the original surety's contractual obligation.

What to check in a bonded lien claim

Obtain the actual bond, identify the parties and amount, and distinguish the claim against the contractor from the claim against the surety. Do not assume that a judgment against one establishes the amount recoverable from the other.

For assistance evaluating a bonded lien, see Kushnick Pallaci PLLC's information on mechanic's lien enforcement and construction litigation.

This historical case note is general information. The applicable bond, procedural history and current law must be reviewed for a particular claim.