Standard Payment Terms
The law provides no framework on standard payment terms, but it is common to rely on 30 days credit terms starting from the invoice date. Broad terms are however very frequent and in practice take place within 40 to 50 days on average , whilst delays of 15 to 30 days may be expected if the transaction is not secured. Having said this, the payment behavior of domestic companies is good and characterized by a strong attachment on trust and business relationships. Therefore, small undertakings are flexible with payment schedules but do not voluntarily delay payments (delays would more likely occur as a result of poor banking support), whilst larger companies would endeavor to pay on time in order to preserve their credit rating and maximize their business opportunities on an international plane. Some exceptions exist of course, and in certain occasions collecting from small and micro companies may prove very difficult because these may change names and operations from one day to the other in order to escape their contractual responsibilities. (Source: Euler Hermes)
The law provides no framework on late payment, which is normally considered as a matter of contractual negotiation. To claim interest pre-legally, it needs to have been previously agreed. Often, a 6% interest rate would be applied but in practice it would be difficult to charge any interest as part of pre-legal negotiations. These would need to be claimed during court proceedings. (Source: Euler Hermes)
Collection costs would usually be used as a negotiation tool when the debtor company has financial difficulties, otherwise they would be charged as part of the legal collection process.
Mexico has a legal system based on Civil Law traditions where the rules are essentially codified. The country is made of 32 states and thus has a federal organisation; various bodies of law operate at the federal level (Civil Code, Commercial Code, and Code of Civil Procedures) and at the state level alike. The judiciary divides into District Courts (competent to deal with civil, commercial and criminal matters) operating in first instance at the federal and state levels alongside with specialized courts (dealing with bankruptcy and family disputes) and administrative courts. The Circuit Courts then act as the appellate body, whilst the Supreme Court operates as the ultimate jurisdiction in Mexico. (Source: Euler Hermes)
- The length of ordinary court proceedings, on average is 1-3 years. Attorneys may take a case against a debtor on a contingency basis. Cases can only be pursued if no pledges or pagares are in place.
- Power of attorney is required. Judgments must be perfectly translated into Spanish before filing.
Legal dunning always ought to start with a registered Demand Letter recalling the debtor its obligation to pay the principal together with late payment interests (as contractually agreed or taking a legal rate as a reference), but this demand may be reinforced if sent through a notary. When the debt is undisputed by the debtor, a 'preparatory media' procedure aims at helping the parties to reach an agreement within three months. In practice, this possibility is rarely relied upon and formal lawsuits remain the default procedure. Formal legal action in first instance would normally take place through either a Civil Process (Civil Complaint about the Debt) or a Commercial Law Process depending on the case. The creditor would file a claim with the District Court, whilst summons would be served to the debtor. There is no pre-trial discovery and defendant and plaintiff must be 100% prepared prior to trial. The debtor would normally be given 15 days to bring a defense. Failure to do so would otherwise entitle the creditor to request a default judgment from the court. Otherwise, the court would review the parties' evidence and arguments over a 40 days period, prior to rendering its decision. In practice, however, these time requirements are not always applied. The courts would normally award remedies in the form of executive orders, specific performance or injunctions. Punitive damages could in theory be awarded but remain rare in practice as the proof threshold is very burdensome. Prior to commencing formal proceedings and provided that the contract allows it, initiating legal action in a foreign jurisdiction or having arbitration or international arbitration may be considered (arbitration may prove more costly than the ordinary lawsuits, however enforceable decisions would be rendered more rapidly). (Source: Euler Hermes)