A contractor's license bond is $12,000. A homeowner obtains a judgment against the contractor for $18,000. How much can the homeowner recover from the bond?
Correct Answer
C) $12,000
Recovery from a contractor's license bond is limited to the bond amount, which in this case is $12,000, regardless of the judgment amount.
Why This Is the Correct Answer
A surety bond's maximum payout is capped at its face value — in this case, $12,000. Even though the judgment is $18,000, the bond only covers up to $12,000. The homeowner may pursue the remaining $6,000 directly from the contractor, but the bond's liability is limited to its stated amount.
Why the Other Options Are Wrong
Option A: $15,000
$15,000 has no basis in bond law. There is no mechanism that splits the difference or averages the bond amount and judgment. The cap is always the bond face value.
Option B: $18,000
$18,000 (the full judgment amount) cannot be recovered from the bond because the bond's face value is only $12,000. The bond cannot pay out more than it is written for.
Option D: $6,000
$6,000 is the difference between the judgment ($18,000) and the bond ($12,000) — essentially the uncovered shortfall. This is what remains unpaid after the bond pays out, not what the bond pays.
Memory Technique
Bond recovery rule: 'You can't squeeze more out of the bond than it holds.' The bond is like a jar of money — once it's empty ($12,000), there's nothing more to take from it, even if the judgment demands more.
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