A contractor furnished a performance bond having a face value of $100,000. The contract price was a lump sum of $1 million. The contractor had completed over 60 percent of the work and had been paid $540,000 by the owner. Then the contractor defaulted, leaving unpaid bills of $100,000. The owner had withheld $60,000 of partial payments due the contractor for work done prior to the default. The owner engaged another contractor to finish the job for $475,000. Does the surety for the performance and payment bonds have to pay? If so, how much? Explain.
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