4.3.4.5 Payment Bonds

• Jurisdiction: Arizona

Payment bonds run for the benefit of unpaid subcontractors and suppliers.^[82] The bond form or statutory language may limit coverage to a certain class of subcontractors or suppliers. Generally, payment bonds protect those who are in privity of contract with the contractor or in privity with one of the prime contractor’s immediate subcontractors. This definition excludes claimants in privity with suppliers and lower-tiered subcontractors. For this reason, the definition of what is a “subcontractor” is often important.

The Arizona Court of Appeals defined the term “subcontractor” in Tiffany Construction Co. v. Hancock & Kelley Construction Co.^[83] The court concluded that any determination of whether a person is a subcontractor or materialman cannot be tested against the black letter formula...