Recent Case Decision – Partial Breach of Contract under Mexican Law

October 17, 2008
Recent Case Decision – Partial Breach of Contract under Mexican Law

This past July the First Chamber of Mexico’s Supreme Court issued a decision contradicting prior judicial decisions holding that when a creditor sues forpartial or total breach of contract, such creditor may not simultaneously compel performance of the contract and payment of a contractual penalty clause,but must instead choose only one of the two remedies. The above was based on review of Article 88 of Mexico’s Commerce Code (Codigo deComercio), which does not distinguish between the types of breach, implying that such article covers both partial breach of contract, as well as totalbreach of contract, from which there is no gap in understanding, which means that article 1846 of the Federal Civil Code does not apply as asupplementary authority. As such, and in view of the terms of the Commerce Code, parties to a commercial agreement obligate themselves according tothe terms of the contract expressing their intent, making it even more important to clearly establish procedures for including penalty clauses for partialbreach of such contracts, independent of the possibility of suing for specific performance.

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