Existing law, the Bond and Undertaking Law, prescribes procedures for a bond or undertaking that is executed, filed, posted, furnished, or otherwise given as a security pursuant to any statute, except as specified. Unless a statute providing for a bond indicates that the bond becomes effective at a different time, a bond is effective at the time it is given or, if the statute requires that the bond be approved, at the time it is approved.

This bill would specify that if a statute provides for a bond to be given to or in favor of a beneficiary that is a public entity, as defined, in connection with the purchase, construction, expansion, improvement, or rehabilitation of any real or other tangible personal property, that bond is not effective unless the beneficiary agrees to (1) make all payments to the principal, or to the surety if the surety agrees to complete the work upon the principal’s default, and (2) perform all necessary obligations owed to the principal under the contract for the work.

995.450.

(a) Notwithstanding any other law, if a statute provides for a bond to be given to or in favor of a beneficiary that is a public entity, as defined in Section 1100 of the Public Contract Code, in connection with the purchase, construction, expansion, improvement, or rehabilitation of any real or other tangible personal property, that bond is not effective unless, before the surety or principal assumes any liability, the beneficiary agrees to do both of the following:

(1) Make all payments to the principal, or to the surety if the surety agrees to complete the work upon the principal’s default, pursuant to the terms of the contract.

(2) Perform all necessary obligations owed to the principal under the contract.

(b) For purposes of this section, “contract” means a written or oral contract, as defined in Section 1549 of the Civil Code, that obligates a principal to purchase, construct, expand, improve, or rehabilitate real or other tangible personal property.