Issue #
February 2010

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Reforms to Mexico’s Civil Code for the Federal District (Unforeseen Events in Contracts)

February 16, 2010

On January 22nd , reforms to Mexico’s Civil Code for the Federal District (Código Civil para el Distrito Federal or CCDF)were published in the Official Journal of the Federation adopting the theory of unforeseen events in agreements that aresubject to time, condition or compliance within a certain time. The reform entered into force on the day following itspublication. The reform assumes that the parties in these types of commercial contracts will be willing, if necessary, toamend a previously signed and finalized agreement if extraordinary events, of a national character, which are impossible toforesee and which make the obligations of one of the parties more onerous under the contract (article 1796 of the CCDF). Inthis case, the affected party has the right to request a reformation of the contract before a judge and the other party, so longas such request is made within thirty days following the occurrence of the alleged extraordinary events, explaining in suchapplication the facts of the matter. An important characteristic is that exercising the action does not suspend the parties’obligation under the contract. Upon giving notice of the alleged unforeseen event, the parties will have thirty calendar daysto reach an agreement and, if unable to do so, the defendant may accept the determination made by the judge if theconsequences are valid and thus determine new conditions of the contract, or, conversely, terminate the contract (article1796 Bis of the CCDF). It is also important to note that in modifying contractual obligations, if such occurs, does not applyto obligations that apply to the time prior to the contractual modification and this action may not be invoked against thosewho are late in complying with the contract, or acting in bad faith (article 1796 Bis. of the CCDF). As one may observe, theprocedure and form adopted by the legislature opens many lines of debate, as well as a substantial window for initiatinglitigation in the future interpretation of contracts governed by the Civil Code of the Federal District or subject to civil law ingeneral. It is important to note that the Civil Codes of the states of Jalisco, Morelos, Coahuila, Chihuahua and the state ofMexico already provide for the theory of unforeseen events, which requires parties to be careful in drafting and enteringinto contracts governed by the state laws of such states, and now including Mexico’s Federal District.

Recent Jurisprudence – Endorsement Requirements When Corporations are Involved

February 16, 2010

Recently, Mexico’s Supreme Court of Justice (Suprema Corte de Justicia de la Nación or SCJN) published in the JudicialWeekly of the Federation case decision Number VI.2o.C.J/315 entitled “Endorsements. Requirements when made by alegal entity.” In such case, the SCJN held that when a legal entity (such as a corporation) endorses a negotiable instrument,said endorsement must contain the entity’s name, as well as the nature of the legal authority of its individual representativewho signs the endorsement. The foregoing, according to Mexico’s highest court, is designed to allow the signatory to beidentified, even if the signature itself is illegible. The SCJN in this case, notwithstanding the clear policy goal thatnegotiable instruments be freely transferable in circulation in order to facilitate commercial transaction without necessarilyhaving to prove the authenticity of signatures or identification, which would give security and solidity to the transfer ofsuch negotiable instruments and facilitate their circulation. This would in no way imply that when the final endorsing partyis a legal entity, that such endorsement does not need to meet the above requirements which must not cause uncertainty orrestrict the circulation of such documents; on the contrary, the requirements provide security to those responsible for payingthat the party presenting the negotiable instrument for payment is the duly authorized representative of the entity holdingsuch document.