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COMMERCIAL DEBT COLLECTION IN MEXICO
by David Carlon, Legal Assistant
Wilcox Legal Group
Is your Mexican client having “cash flow problems”? Alleging a dispute but refuses to pay the undisputed balance of her invoice(s)? Has she stopped taking your calls? What significant differences, other than the obvious of language and culture, does an American debt collector encounter in Mexico? Is your DSO beyond the industry average? This article provides a thumbnail sketch of debt collection and related litigation in Mexico, “la cobranza judicial.”
Statute of Limitations
Pagaré (Mexican Promissory Note): Domestic Mexican transaction is 3 years from maturity date. There are limited exceptions. Consult a Mexican attorney for specific counsel.
Retail within Mexico from date of last payment: 1 year
Commercial within Mexico from date of last payment: 10 years
Retail and commercial international or cross-border transactions from date of last payment: 4 years
Fraud involving credit or purchase of goods: If perpetrated within Mexico, 1 year from the time the victim becomes aware of the fraudulent act, or admission by the perpetrator; 2 years if fraud involves an international or cross-border transaction.
NSF Checks:
· 6 months from date of rejection by the debtor’s bank (drawee) if the debtor (drawer) is located in Mexico and the debtor’s bank (drawee) is located out of the country. Check must be presented to the debtor’s (drawer) bank (drawee) within 3 months (stale date).
· 1 month if both drawer and payee are located in Mexico but in different cities.
· 15 days if drawer and payee are located in Mexico and in the same city.
The Pagaré (Mexican Promissory Note)
Mexican law governing promissory notes is specific and unwavering. Certain language and information must be contained in the pagaré to make it compliant with Mexican law and thusly, valid and enforceable throughout Mexico. The pagaré must include:
· The word pagaré must be expressly contained within the instrument itself. If the note must be enforced, the Mexican court will look for the word pagaré, not promissory note.
· The unconditional promise to pay a certain amount of money. The denomination can be a foreign currency but the amount has to be specific.
· The name of the bearer or beneficiary has to be specific. The beneficiary can be an individual or a company.
· The time and place where the note is subscribed. A pagaré will not be enforceable if either is missing. If it’s executed (signed) in the USA, make sure to include a governing law clause stipulating that Mexican Law applies. When in doubt, always include the clause.
· The original signature of the issuer of the pagaré. An original signature provides for “expeditious” execution of prejudgment remedies. A facsimile or copy machine signature can be pursued but the process is lengthy. There are 2 basic proceedings used in collection litigation in Mexico: Ordinary and executive proceedings. An ordinary proceeding is used when a signed, original credit instrument or other title document “título ejecutivo” is missing.
· The time and place where payment is to be made*. This is not required for validity of the note, but is extremely important should enforcement of the pagaré become necessary, as it establishes proper venue and jurisdiction. There are certain Mexican states that pose greater political, bureaucratic, and resource risk for pre and post-judgment enforcement, and should always be avoided when possible. If no specific domicile is detailed the location where the pagaré was issued will likely be the venue. The instrument will considered payable upon demand if the date of payment is missing (maturity date).
· Draft the pagaré in Spanish and English*. When possible draft the note in plain Spanish and English and accommodate both language versions in the same instrument.
*Not required for validity but recommended.
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