MISSISSIPPI LEGISLATURE

1998 Regular Session

To: Business and Financial Institutions

By: Senator(s) Carter

AN ACT TO AMEND SECTION 85-7-185, MISSISSIPPI CODE OF 1972, TO REQUIRE PERSONS ENTERING INTO PRIVATE CONTRACTS FOR CONSTRUCTION, ALTERATION OR REPAIR FOR A COST OF $1,000,000.00 OR MORE TO FURNISH PERFORMANCE AND PAYMENT BONDS; TO REPEAL SECTION 85-7-187, MISSISSIPPI CODE OF 1972, WHICH PROVIDES FOR PERSONS WITH A RIGHT OF ACTION ON CONSTRUCTION BONDS; TO AMEND SECTION 85-7-189, MISSISSIPPI CODE OF 1972, TO PROVIDE FOR CONTRACTS GREATER THAN $1,000,000.00; TO AMEND SECTION 85-7-191, MISSISSIPPI CODE OF 1972, TO APPLY ONLY TO CONTRACTS LESS THAN $1,000,000.00; AND FOR RELATED PURPOSES. 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 85-7-185, Mississippi Code of 1972, is amended as follows:

85-7-185. (1) * * * Any person entering into a formal contract with any person, firm or corporation, for the construction, alteration or repair of any building or work * * * at a cost of One Million Dollars ($1,000,000.00) or more, shall furnish to such person, firm or corporation bonds with good and sufficient surety as follows before entering into the contract:

(a) A performance bond payable to, in favor of or for the protection of the owner, for the work to be done in an amount not less than the amount of the contract, conditioned for the full and faithful performance of the contract * * *.

(b) A payment bond payable to such owner but conditioned for the prompt payment of all persons supplying labor or material used in the prosecution of the work under said contract, for the use of each such person, in an amount not less than the amount of the contract.

(c) The bonds herein provided for may be made by any surety company which is authorized to do business in the State of Mississippi and listed on the United States Treasury Department's list of acceptable sureties, or such bonds may be guaranteed by a personal surety as follows: The personal surety shall deposit with the State Treasurer cash or certificates of deposit in an amount not less than the amount of the contract, and the State Treasurer shall hold same in trust and on deposit for the benefit of the person, firm or corporation that is a party to the contract providing for the construction, alteration or repair of the building or for the work.

(2) Every person who has furnished labor or material used in the prosecution of the work provided for in a contract for which a payment bond is furnished and who has not been paid in full therefor before the expiration of a period of ninety (90) days after the date on which the last of the labor was performed by him or the last of the materials was furnished by him and for which such claim is made, shall have the right to sue on such payment bond for the amount owed, or the balance thereof that is due and payable but unpaid at the time of institution of such suit, and to prosecute said action to final execution and judgment, provided the labor or materials have been approved, where required, by the owner or the owner's architect or engineers, or where approval is being withheld as a result of unreasonable acts of the contractor. Notwithstanding anything to the contrary contained herein, if the amount claimed in such action is subject to contractual provisions or conditions between the parties involved in such action, the action shall be abated pending the performance of such provisions and the fulfillment of such conditions.

(3) Any person having direct contractual relationship with a subcontractor but no contractual relationship, express or implied, with the contractor furnishing said payment bond, shall have a right of action upon the payment bond upon giving written notice to the contractor within ninety (90) days from the date on which the person did or performed the last of the labor or furnished or supplied the last of the material for which claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed. Notice shall be given in writing by the claimant to the contractor or surety at any place where the contractor or surety maintains an office or conducts business, and may be personally delivered by the claimant to the contractor or surety, or mailed by certified mail, return receipt requested, postage prepaid, to the contractor or surety. No action under this section may be maintained by any person not having a direct contractual relationship with the contractor-principal unless the notice required by this section shall have been given.

(4) The only persons protected by such payment bond, subject to the notice provisions of this section, are:

(a) Subcontractors and material suppliers of the contractor;

(b) Sub-subcontractors and material suppliers of those subcontractors named in paragraph (4)(a) of this section; and

(c) Laborers who have performed work on the project site.

(5) Any person supplying labor or materials for the prosecution of the work shall, upon request to the obligee, be furnished with a certified copy of the contract and bonds.

SECTION 2. Section 85-7-187, Mississippi Code of 1972, which provides when a person supplying labor or materials has a right of action on a contractor's performance bond, is repealed.

SECTION 3. Section 85-7-189, Mississippi Code of 1972, is amended as follows:

85-7-189. When suit is instituted * * * on a payment or performance bond, it * * * shall be commenced within one (1) year after the performance and final settlement of said contract and not later, except that if the contractor quits or abandons the contract before its completion, suit may be instituted * * * on said bond and shall be commenced within one (1) year after such abandonment and not later. But said time for the * * * institution of said action shall not begin to run until * * * the obligee shall have made said final settlement or determined said abandonment and published notice thereof in some newspaper published in a county in which the contract or some part thereof was performed or in some newspaper having a general circulation therein * * *. Venue on any such suit shall lie in the county in which the contract or some part thereof was performed or in the county in which service of process may be obtained upon either the principal or the surety on such bond.

SECTION 4. Section 85-7-191, Mississippi Code of 1972, is amended as follows:

85-7-191. When suit is so instituted on any contract of less than One Million Dollars ($1,000,000.00) by any person, only one (1) action shall be brought and any person entitled to sue may upon application intervene and be made a party to said suit; however, such intervention must occur within the time limited for such person to bring an original action.

SECTION 5. This act shall take effect and be in force from and after July 1, 1998.