Tennessee Code Annotated
Tenn. Code Ann. § 12-4-201 (2026)
Contractors bonds - Securities or cash in lieu of bonds
✓ current as of May 2026
- (a)
- (1) No contract shall be let for any public work in this state, by any city, county or state authority, until the contractor shall have first executed a good and solvent bond to the effect that the contractor will pay for all the labor and materials used by the contractor, or any immediate or remote subcontractor under the contractor, in such contract, in lawful money of the United States. The bond to be so given shall be for no less than twenty-five percent (25%) of the contract price on all contracts in excess of one hundred thousand dollars ($100,000). Where advertisement is made, the condition of the bond shall be stated in the advertisement; provided, that §§ 12-4-201 - 12-4-206 shall not apply to contracts of one hundred thousand dollars ($100,000) or less.
- (2) A good and solvent bond means a bond written by a surety or insurance company listed on the United States department of the treasury financial management service list of approved bonding companies which is published annually in the federal register at the time the bond is provided in accordance with this part.
- (3) No bond shall be deemed to be a good and solvent bond if it is written for an amount which is in excess of the amount indicated as approved for sureties or insurance companies by the United States department of the treasury financial management service list published at the time the bond is provided.
- (4) Any surety bond written for a public work project shall be written by a surety or insurance company that is licensed and authorized to do business as a surety or insurer in this state.
- (5) Any bond which is not in accordance with this section shall be null and void as against the public policy of this state and shall be rejected by the building or bidding authority.
- (b)
- (1) No contract let for any public work in this state, by any city, county or state authority, shall require a contractor or subcontractor to obtain any bond including, but not limited to, payment bonds, performance bonds and bid bonds, from a particular surety, agent, broker or producer.
- (2) No public officer, whose duty it is to let or award contracts, shall require a contractor or subcontractor to obtain any bond, including, but not limited to, payment bonds, performance bonds and bid bonds, from a particular surety, agent, broker or producer.
- (3) This subsection (b) shall not preclude a city, county, or state authority from requiring that a contractor or subcontractor obtain a bond, including payment bonds, performance bonds and bid bonds, from a properly licensed surety, agent, broker or producer.
- (c) In lieu of the bond required by subsection (a), the following securities or cash may be substituted at the percentage rate required for such bond:
- (1) United States treasury bonds, United States treasury notes and United States treasury bills;
- (2) General obligation bonds of the state of Tennessee;
- (3) Certificates of deposit or evidence of other deposits irrevocably pledged from:
- (A) A state or national bank having its principal office in Tennessee;
- (B) A state or federal savings and loan association having its principal office in Tennessee;
- (C) Any state or national bank, that has its principal office located outside this state and that maintains one (1) or more branches in this state which are authorized to accept federally insured deposits; or
- (D) Any state or federal savings and loan association that has its principal office located outside this state and that maintains one (1) or more branches in this state which are authorized to accept federally insured deposits;
- (4) A letter of credit from a state or national bank or state or federal savings and loan association having its principal office in Tennessee; or any state or national bank or state or federal savings and loan association that has its principal office outside this state and that maintains one (1) or more branches in this state which are authorized to accept federally insured deposits. The terms and conditions of any letter of credit shall be subject to the approval of the public official named in the contract. The form of such letter of credit shall be provided by the bank or savings and loan association and may be based on either the Uniform Commercial Code, title 47, chapter 5, or the ICC Uniform Customs and Practice for Documentary Credits (UCP 500). All letters of credit shall be accompanied by an authorization of the contractor to deliver retained funds to the bank issuing the letter; or
- (5) Cash; provided, that, where cash is posted, the contracting authority shall pay to the contractor interest at the same rate that interest is paid on funds invested in a local government investment pool established pursuant to § 9-4-704, for the contract period.
Amended by 2017 Tenn. Acts, ch. 92, s 1, eff. 4/4/2017.
Amended by 2013 Tenn. Acts, ch. 195, s 1, eff. 4/23/2013.
Acts 1925, ch. 121, § 1; Shan. Supp., § 3546a4; mod. Code 1932, § 7955; Acts 1977, ch. 188, § 1; T.C.A. (orig. ed.), § 12-417; Acts 1985, ch. 151, § 1; 1986, ch. 551, § 8; 1989, ch. 84, § 1; 1997 , ch. 402, § 13; 2003 , ch. 82, § 1; 2004, ch. 518, § 1.
Notes of Decisions
Cited in 9
cases (2 in the last 5 years), 1981–2025 · leading case: Moore Constr. Co. v. Clarksville Dep't of Elec., 707 S.W.2d 1 (Tenn. Ct. App. 1986).
Moore Constr. Co. v. Clarksville Dep't of Elec., 707 S.W.2d 1 (Tenn. Ct. App. 1986). “Following the accepted practice of the construction industry and pursuant to Tenn.Code Ann. § 12-4-201 et seq., Kennon furnished the Department with a standard form performance bond and a standard form labor and material payment *4 bond 3 each issued by the Cincinnati Insurance…”
Nashville Ford Tractor, Inc. v. Great Am. Ins. Co., 194 S.W.3d 415 (Tenn. Ct. App. 2005). “Tenn.Code Ann. § 12-4-201(a) (Supp.2005) provides as follows: No contract shall be let for any public work in this state, by any city, .”
Wal-Bd. Supply Co., Inc. v. Daniels, 629 S.W.2d 686 (Tenn. Ct. App. 1981). “2d 312 ), plaintiff moved to amend its original complaint to add as a defendant the Aetna Casualty & Surety Company, surety on the payment bond executed by Rooney as required by T.C.A. §§ 12-4-201 through -208 (formerly §§ 12-417 through -424), and the claim against the…”
Inryco, Inc. v. Eatherly Constr. Co. & Safeco Ins. Co. of Am., 793 F.2d 767 (6th Cir. 1986). “Although seeking a uniform construction and application, the Tennessee courts have recognized that the Tennessee legislature has elected to address bonds on public works projects in general (Tenn.Code Ann. § 12-4-201) and bonds on highway projects (Tenn.”
HAYES PIPE SUPPLY, INC. v. Aegis Sec. Ins. Co. (Bankr. M.D. Tenn. 2022). “The Tennessee Supreme Court in Koch also found these two additional factors relevant to its determination that the bond in question was a common law bond: that (i) the bond made “no explicit reference to the Tenn. Code Ann. § 12-4-201 – 12-4- 206,” and (ii) “it neither expressly…”
White's Elec. v. Lewis Constr. (Tenn. Ct. App. 1999). “See Tenn. Code Ann. § 12-4-201 (Supp. 1998). A subcontractor may bring an action on the contractor’s bond and obtain recovery in its own name.”
E Solutions For Bldgs., LLC v. Knestrick Contractor, Inc. (Tenn. Ct. App. 2019). “Moreover, on remand the trial court should recalculate the award of prejudgment interest to take into consideration the increase in the judgment in favor of E Solutions.”
Ferguson Enter., LLC v. Norris Bros. Excavating, LLC (Tenn. Ct. App. 2025). “Therefore, pursuant to Tenn. Code Ann. § 12-4-201 , Ferguson sent a notice to NBE and Atlantic demanding payment for the materials.”
Nashville Ford Tractor v. Great Am. Ins. Co. (Tenn. Ct. App. 2004). “” 3 Tenn. Code Ann. § 12-4-201 (a) (Supp. 2005) provides as follows: No contract shall be let for any public work in this state, by any city, .”
— Tenn. Code Ann. § 12-4-201(a) — 1 case
Nashville Ford Tractor, Inc. v. Great Am. Ins. Co., 194 S.W.3d 415 (Tenn. Ct. App. 2005). “Tenn.Code Ann. § 12-4-201(a) (Supp.2005) provides as follows: No contract shall be let for any public work in this state, by any city, .”
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