2010 California Code
Civil Code
Chapter 6. Payment Bond

8600.  (a) This section applies if, before the commencement of work,
the owner in good faith files a direct contract with the county
recorder, and records a payment bond of the direct contractor in an
amount not less than 50 percent of the price stated in the direct
contract.
   (b) If the conditions of subdivision (a) are satisfied, the court
shall, where equitable to do so, restrict lien enforcement under this
title to the aggregate amount due from the owner to the direct
contractor and shall enter judgment against the direct contractor and
surety on the bond for any deficiency that remains between the
amount due to the direct contractor and the whole amount due to
claimants.


8602.  Section 8600 does not preclude an owner from requiring a
performance bond, payment bond, or other security as protection
against a direct contractor's failure to perform the direct contract
or to make full payment for all work provided pursuant to the
contract.



8604.  (a) If a lending institution requires that a payment bond be
given as a condition of lending money to finance a work of
improvement, and accepts in writing as sufficient a bond given in
fulfillment of the requirement, the lending institution may not
thereafter object to the borrower as to the validity of the bond or
refuse to make the loan based on an objection to the bond if the bond
is given by an admitted surety insurer.
   (b) For purposes of this section, a "lending institution" includes
a commercial bank, savings and loan institution, credit union, or
other organization or person engaged in the business of financing
loans.



8606.  (a) A payment bond under this title shall be conditioned for
the payment in full of the claims of all claimants and shall by its
terms inure to the benefit of all claimants so as to give a claimant
a right of action to enforce the liability on the bond. The bond
shall be given by an admitted surety insurer.
   (b) An owner, direct contractor, or subcontractor may be the
principal on the bond.
   (c) A claimant may enforce the liability on the bond in an action
to enforce a lien under this part or in a separate action on the
bond.


8608.  (a) This title does not give a claimant a right to recover on
a direct contractor's payment bond given under this chapter unless
the claimant provided work to the direct contractor either directly
or through one or more subcontractors, pursuant to a direct contract.
   (b) Nothing in this section affects the stop payment notice right
of, and relative priorities among, design professionals and holders
of secured interests in the real property.



8609.  Any provision in a payment bond attempting by contract to
shorten the period prescribed in Section 337 of the Code of Civil
Procedure for the commencement of an action on the bond shall not be
valid under either of the following circumstances:
   (a) If the provision attempts to limit the time for commencement
of an action on the bond to a shorter period than six months from the
completion of any work of improvement.
   (b) As applied to any action brought by a claimant, unless the
bond is recorded before the work of improvement is commenced.



8610.  Notwithstanding Section 8609, if a payment bond under this
title is recorded before completion of a work of improvement, an
action to enforce the liability on the bond may not be commenced
later than six months after completion of the work of improvement.




8612.  (a) In order to enforce a claim against a payment bond under
this title, a claimant shall give the preliminary notice provided in
Chapter 2 (commencing with Section 8200).
   (b) If preliminary notice was not given as provided in Chapter 2
(commencing with Section 8200), a claimant may enforce a claim by
giving written notice to the surety and the bond principal within 15
days after recordation of a notice of completion. If no notice of
completion has been recorded, the time for giving written notice to
the surety and the bond principal is extended to 75 days after
completion of the work of improvement.



8614.  Notice to the principal and surety under Section 8612 shall
comply with the requirements of Chapter 2 (commencing with Section
8100) of Title 1.