1995 - 1996 LEGISLATURE
January 25, 1996 - Introduced by Senator Schultz, cosponsored by
Representatives Freese, Goetsch, Ainsworth, Grothman and Musser.
Referred to Committee on Business, Economic Development and Urban
Affairs.
SB498,1,5 1An Act to renumber and amend 779.035 (2); to amend 779.02 (6), 779.14 (1m)
2(b) 1. and 779.14 (2) (a) (intro.); and to create 779.035 (2) (b) and 779.14 (2) (am)
3of the statutes; relating to: subcontractor and supplier claims against private
4and public construction project payment bonds and defense of actions by prime
5contractors on construction liens.
Analysis by the Legislative Reference Bureau
Under current law, when a construction lien is filed by a person other than the
prime contractor, the prime contractor is required to defend against any action on the
lien at personal expense and the owner may withhold from the prime contractor the
amount for which the lien was filed, plus an amount sufficient to defray the costs of
the action. In the case of judgement against the owner, the owner may deduct the
amount of the judgement from any amount due the prime contractor. This bill
provides that these provisions do not apply if the lien is the result of the failure of
the owner to pay the prime contractor.
Under current law, every person who performs any work or procures its
performance or furnishes any labor, materials, plans or specifications for the
improvement of land, has a lien on the land, provided that certain requirements are
met. If the prime contractor, pursuant to agreement with the owner, has furnished
a payment bond, construction liens are not created for subcontractors and suppliers
providing labor or material for the improvement project. Instead, these persons may
maintain an action 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.
This bill provides that a subcontractor or supplier may maintain such an action
only if the subcontractor or supplier has met certain notice requirements or is exempt

from the notice requirements. Generally, the subcontractor or supplier must notify
the prime contractor in writing that the subcontractor or supplier is providing labor
or materials for the construction of the improvement; the notice must be provided
within 60 days after first providing the labor or materials. Notice is not required if
the contract for the provision of the labor or materials does not exceed $5,000; if the
action is brought by an employe of the prime contractor, the subcontractor or the
supplier; or if the subcontractor or supplier is listed in a written contract, or in a
document appended to a written contract, between a subcontractor or supplier and
the prime contractor.
Current law also generally requires a prime contractor on a public construction
project to provide the state or other governmental unit with a performance and
payment bond to ensure that all subcontractors and suppliers to the project are paid.
This bill imposes similar notice requirements and exemptions for subcontractors and
suppliers who wish to maintain an action against the prime contactor and the
sureties on this performance and payment bond. In addition, the bill requires the
prime contractor on a public construction project to maintain a list, to the extent
practicable, of all subcontractors and suppliers performing labor or furnishing
materials for the public construction project. In addition to the exemptions from the
notice requirement for contracts not exceeding $5,000, for actions by employes and
actions by subcontractors or suppliers listed in contacts with the prime contractor,
no notice is required if the subcontractor or supplier is listed on the list of
subcontractors or suppliers required to be maintained by the prime contractor.
For further information see the state and local fiscal estimate, which will be
printed as an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB498, s. 1 1Section 1. 779.02 (6) of the statutes is amended to read:
SB498,3,22 779.02 (6) Prime contractors to defend lien actions. Where a lien is filed
3under this subchapter by any person other than the prime contractor, the prime
4contractor shall defend any action thereon at personal expense, and during the
5pendency of the action the owner may withhold from the prime contractor the
6amount for which the lien was filed and sufficient to defray the costs of the action.
7In case of judgment against the owner, the owner may deduct from any amount due
8to the prime contractor the amount of the judgment and if the judgment exceeds the
9amount due, the owner may recover the difference from the prime contractor. This

1subsection does not apply if the lien is the result of the failure of the owner to pay the
2prime contractor.
SB498, s. 2 3Section 2. 779.035 (2) of the statutes is renumbered 779.035 (2) (a) and
4amended to read:
SB498,3,125 779.035 (2) (a) Any Except as provided in par. (b), any party in interest may,
6not later than one year after the completion of the contract for the construction of the
7improvement
, maintain an action in his or her own name against the prime
8contractor and the sureties upon the bond for the recovery of any damages sustained
9by reason of the failure of the prime contractor to comply with the contract or with
10the contract between the prime contractor and subcontractors. If the amount
11realized on the bond is insufficient to satisfy all of the claims of the parties in full,
12it shall be distributed among the parties proportionally.
SB498, s. 3 13Section 3. 779.035 (2) (b) of the statutes is created to read:
SB498,3,1914 779.035 (2) (b) 1. Except as provided in subd. 2., a subcontractor or supplier
15may maintain an action under par. (a) only if the subcontractor or supplier has
16notified the prime contractor in writing that the subcontractor or supplier was
17providing labor or materials for the construction of the improvement. The notice
18must be provided within 60 days after the date on which the subcontractor or
19supplier first provided the labor or materials.
SB498,3,2020 2. A notice under subd. 1. is not required if any of the following applies:
SB498,3,2221 a. The contract for the provision of the labor or materials does not exceed
22$5,000.
SB498,3,2423 b. The action is brought by an employe of the prime contractor, the
24subcontractor or the supplier.
SB498,4,3
1c. The subcontractor or supplier is listed in a written contract, or in a document
2appended to a written contract, between a subcontractor or supplier and the prime
3contractor.
SB498, s. 4 4Section 4. 779.14 (1m) (b) 1. of the statutes is amended to read:
SB498,4,145 779.14 (1m) (b) 1. A contract under par. (a) shall not be made unless the prime
6contractor gives a bond issued by a surety company licensed to do business in this
7state and unless the prime contractor agrees, to the extent practicable, to maintain
8a list of all subcontractors and suppliers performing labor or furnishing materials
9under the contract
. The department of natural resources for contracts under s. 23.41,
10the department of administration for other state contracts, and the public board or
11body authorized to enter into such contracts for all other contracts under par. (a), may
12waive the requirement that contractors furnish bonds if guarantees or warranties
13deemed adequate by the department of natural resources, department of
14administration or public board or body are provided for by the contract.
SB498, s. 5 15Section 5. 779.14 (2) (a) (intro.) of the statutes is amended to read:
SB498,4,2016 779.14 (2) (a) (intro.) Not Except as provided in par. (am), no later than one year
17after the completion of work under the contract, any party in interest, including any
18subcontractor or supplier, may maintain an action in that party's name against the
19prime contractor and the sureties upon the bond for the recovery of any damages
20sustained by reason of any of the following:
SB498, s. 6 21Section 6. 779.14 (2) (am) of the statutes is created to read:
SB498,5,222 779.14 (2) (am) 1. Except as provided in subd. 2., a subcontractor or supplier
23may maintain an action under par. (a) only if the subcontractor or supplier has
24notified the prime contractor in writing that the subcontractor or supplier has
25provided or will provide labor or materials to the public work or improvement. The

1notice must be provided within 60 days after the date on which the subcontractor or
2supplier first provided the labor or materials.
SB498,5,33 2. A notice under subd. 1. is not required if any of the following applies:
SB498,5,54 a. The contract for the provision of the labor or materials does not exceed
5$5,000.
SB498,5,76 b. The action is brought by an employe of the prime contractor, the
7subcontractor or the supplier.
SB498,5,108 c. The subcontractor or supplier is listed in the list required to be maintained
9under sub. (1m) (b) 1. or in a written contract, or in a document appended to a written
10contract, between a subcontractor or supplier and the prime contractor.
SB498, s. 7 11Section 7. Initial applicability.
SB498,5,13 12(1) This act first applies to contracts entered into on the effective date of this
13subsection.
SB498, s. 8 14Section 8. Effective date.
SB498,5,16 15(1) This act takes effect on the first day of the 4th month beginning after
16publication.
SB498,5,1717 (End)
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