Recent Case Decision – Collection of Bonds

August 12, 2009
Recent Case Decision – Collection of Bonds

On March 4, 2009, the First Chamber of Mexico’s Supreme Court of Justice (Suprema Corte deJusticia de la Nación) issued case decision number 1a./J.96/2008, under the title “Bonds. Thenotice requirement provided in article 118 Bis of the Federal Surety Institutions Law is acondition precedent that must be met before asserting the collection instrument provided inarticle 96 of such law.” In this decision, the Court held that article 118 Bis of the Federal SuretyInstitutions Law does not contradict the provisions of article 96 of such law because theobligation that a surety company has to provide notice to the bond holder of the claim madeagainst the bond by the beneficiary of such bond is a condition precedent that must be met beforethe surety company validates the instrument purporting to require performance of the bondapplicant, obligor, indemnitor or guarantor, because the above cited article 118 Bis of the FederalSurety Institutions Law does not leave any room for any interpretation to the contrary. Mexico’sSupreme Court explains that in the event a surety institution fails to meet the precondition setforth in article 118 Bis of said law, the collection document would be null given its failure tostrictly comply with the condition precedent provided by such law before proceeding withcollection.

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