What are the rights of the innocent party given
the event of a breach of contract in Mexico?
By Robles, Lazo y Gallardo Law Firm • July 2010
In general terms, the victim of breach of contract in Mexico, can choose between any of the following rights:
a) To demand the rescission of the contract; or
b) To demand the fulfillment of the agreement, when possible, based under the particular circumstances of each case.
In both cases, damages and lost profits, or the payment of a contractual penalty and/or interests that are previously agreed by the parties involved, are retrievable by the innocent party.
- What happens if I choose to demand the rescission?
When the victim chooses to demand the rescission, the parties shall return the considerations that they had delivered to each other, except for those that because of their nature can not be returned.
- What happens if I chose to demand the fulfillment?
in this scenario, the party that breaches the contract shall fulfill all the obligations set forth, and if said party does not fulfill voluntarily, the judge will do so on its behalf.
- What kind of damages and lost profits can I request? What is the difference between damages and lost profits and the contractual penalty?
All damages (expenses) and lost profits (losses) can be requested, when those are due to the breacher of the contract directly. The contractual penalty is an amount of money, settled on the agreement for the event of beach of contract, in lieu of damages and lost profits, or as the minimum amount of said damages and lost of profits; the advantage of the contractual penalty is that breach of contract is the only thing that shall be proved. Also, it is possible to agree penalties for the breach, and penalties for the delay on the fulfillment or past due interest (penalty interest).
- Do I have to sue necessarily?
if the breach of contract is not solved by a settlement with the seller, it is necessary to take the matter to a court of law, by filing a civil or commercial lawsuit, depending on the kind of purchase. In some cases, when the seller’s behavior is considered as a felony, it is possible to file charges before the Ministerio Público (public prosecutor), therefore an investigation shall be performed and if it is the case, the responsible shall be prosecuted of a crime.
- How long does it take for a lawsuit to be resolved in Mexico?
Usually a civil or commercial lawsuit takes at least one year, but it can be two or three. This is caused, in addition to the excess of cases that are handled by the pertinent law courts, because unlike the American legal system, on the Mexican’s judicial system almost all sentences are appealed and, after that, it is still possible to challenge the second instance sentence by filing an amparo, which works like a third instance; due to the above mentioned, it is fairly common that in most of the cases three sentences are passed before the suit is fully resolved.
- What should I do in order to avoid risks in real estate purchases?
1) Be thoroughly advised, from the very beginning, by a lawyer (specialized in Real Estate Law), who reviews all documents and records of the real estate on a preliminary basis.
2) If possible, before paying any amount, to execute a preliminary agreement (purchase offer, promise of purchase, option of purchase, etc.), establishing a period of time in order to conduct a full due diligence (ownership title, liens, encumbrances, surface, etc).
3) Once the above mentioned due diligence is done, execute a definitive contract (a trust shall be executed for foreign individuals, if the real estate is located within 50 kilometers from the coast line), execute a public deed, and be sure that the public deed is duly registered before the Public Registry of Property. It is also recommended to obtain an insurance title, in order to protect the buyer against any possible loss arising from problems connected to the title of the property. Email to a friend
Robles, Lazo y Gallardo - Law Firm
E-mail: jgallardo@rlg.com.mx
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• Robles, Lazo y Gallardo, S.C. is a Law Firm of specialists in various areas of Law, including Corporate Law, Real Estate, Immigration, Foreign Investment, among others. The Firm is integrated with a group of highly qualified attorneys and has offices in Guadalajara (Privada del Niño No. 676, Fraccionamiento Camino Real, telephone number 33-3121-3010 33-3121-3010 ) and Puerto Vallarta (Carretera a Mismaloya No. 479 interior 107, Edificio Scala. Telephone number 322-223-3218 322-223-3218 ).E-mail: jgallardo@rlg.com.mx
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