779.035 Form of contract; payment bond; remedy.

(1) To eliminate lien rights as provided in s. 779.03 (2), the contract between the owner and the prime contractor for the construction of the improvement shall contain a provision for the payment by the prime contractor of all claims for labor, services, materials, plans, or specifications performed, furnished, procured, used, or consumed, except plans or specifications furnished by the architect, professional engineer or surveyor employed by the owner, in making such improvement and performing the work of improvement. The contract shall not be effective to eliminate lien rights unless the prime contractor gives a bond issued by a surety company licensed to do business in this state. The bond shall carry a penalty for unpaid claims of not less than the contract price, and shall be conditioned for the payment to every person entitled thereto of all the claims for labor, services, materials, plans, and specifications performed, furnished, or procured under the contract and subsequent amendments thereto, to be used or consumed in making the improvement or performing the work of improvement as provided in the contract and subsequent amendments thereto. The bond shall be approved by the owner and by any mortgage lender furnishing funds for the construction of the improvement. No assignment, modification or change in the contract, or change in the work covered thereby, or any extension of time for completion of the contract shall release the sureties on the bond.

(2)

(a) Except as provided in par. (b), any party in interest may, not later than one year after the completion of the contract for the construction of the improvement, maintain an action in his or her own name against the prime contractor and the sureties upon the bond for the recovery of any damages sustained by reason of the failure of the prime contractor to comply with the contract or with the contract between the prime contractor and subcontractors. If the amount realized on the bond is insufficient to satisfy all of the claims of the parties in full, it shall be distributed among the parties proportionally.

(b)

1. Except as provided in subd. 2., a subcontractor, supplier, or service provider may maintain an action under par. (a) only if the subcontractor, supplier, or service provider has notified the prime contractor in writing that the subcontractor, supplier, or service provider was performing, furnishing, or procuring labor, services, materials, plans, or specifications for the construction of the improvement. The notice must be provided no later than 60 days after the date on which the subcontractor, supplier, or service provider first performed, furnished, or procured the labor, services, materials, plans, or specifications.

2. A notice under subd. 1. is not required if any of the following applies:

a. The contract for performing, furnishing, or procuring the labor, services, materials, plans, or specifications does not exceed $5,000.

b. The action is brought by an employee of the prime contractor, the subcontractor or the supplier.

c. The subcontractor, supplier, or service provider is listed in a written contract, or in a document appended to a written contract, between a subcontractor, supplier, or service provider and the prime contractor.

(3) In any case in which the improvement contract and bond have been prepared and executed pursuant to sub. (1) upon inquiry by any subcontractor, supplier, service provider, laborer, or mechanic performing, furnishing, or procuring labor, services, materials, plans, or specifications for said improvement, the prime contractor and the owner shall so advise the person making the inquiry and shall give the person reasonable opportunity to inspect and examine the contract and bond.

History: 1973 c. 230; 1979 c. 32 ss. 57, 92 (9); 1979 c. 110 s. 60 (12); 1979 c. 176; Stats. 1979 s. 779.035; 1991 a. 200; 1993 a. 213; 1995 a. 395; 2005 a. 204.

A provision in a contractor's payment bond requiring a supplier of a subcontractor to provide notice to the prime contractor within 90 days after supplying materials in order to secure his rights under the payment bond was not inconsistent with the one-year statute of limitations provided by sub. (2), which was also incorporated into the agreement, and hence was not contrary to public policy. R.C. Mahon Co. v. Hedrich Construction Co. 69 Wis. 2d 456, 230 N.W.2d 621 (1975).

The liability of a prime contractor for damages to employees of a subcontractor under s. 779.14 (2) did not include wage penalties under s. 66.293 [now s. 66.0903] (3). Consent to be a named a party under s. 66.293 (3) may occur after one year when the action is for damages under s. 66.293 in the name of the plaintiffs and other similarly situated employees and was filed within the one-year time period. Strong v. C.I.R., Inc. 184 Wis. 2d 619, 516 N.W.2d 719 (1994).