Surety and Principal promise to provide compensation to the Obligee if the Principal fails or does not fulfill his obligation to make payments to the Obligee in connection with the work that has been done by the Principal.

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If the Principal fails to make payments to the Obligee after the period determined by both parties, the Obligee can redeem the Payment Collateral at the pledged value.

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For Payment Bond, the type of contract that is often used is the Turn Key / Contract model type which states that payment for the work will be made when the work is 100% complete.