Mexican Legal Framework of Business Insolvency - White & Case
Mexican Legal Framework of Business Insolvency - White & Case Mexican Legal Framework of Business Insolvency - White & Case
52 declaration of, concurso, shall be deemed not included therein [LCM 87]. That is, the courts would not recognize the validity of a clause in an agreement that would give a party the right to terminate such agreement in the event of a petition or demand for, or declaration of, concurso of the other party. Any party to an executory contract with the debtor shall be entitled to require the conciliator to declare whether he will assume or reject the contract. If the conciliator declares the assumption of the contract, the debtor must perform or guarantee performance thereunder. If the conciliator rejects the contract, or does not provide an answer within 20 business days, the debtor’s counterparty may thereafter declare the termination of the contract [LCM 92]. An unresolved issue is whether the conciliator has the authority to decide on a partial assumption of a contract. Prevailing opinion is that no such authority exists and the contract would have to be assumed or rejected in its entirety. A similar rule exists in the liquidation stage, when the sale of the estate is carried out as a transfer of the enterprise or parts thereof as a going concern. However, in this case, the rules and presumptions operate in an inverse sense: The receiver shall notify each counterparty that they have ten business days to decide whether to continue or reject the contract. Failure of a counterparty to respond shall be deemed as consenting to the continuation of the contract [LCM 211]. iv. Executory Contracts (continued) The principles set forth in 15.n.iii constitute general principles applicable to executory contracts; however, the Insolvency Law provides an exhaustive list of cases under which a specific regime applies to specific executory contracts [LCM 93-111]: 1. Purchases In the case of purchase agreements where the debtor is a purchaser, the seller is not required to deliver the subject matter of the contract (whether realty or
chattel 35 ) unless its price is paid for or guaranteed [LCM 93]. Similarly, a purchaser debtor cannot demand delivery of unpaid goods if the debtor does not pay or guarantee payment for the purchase price [LCM 96]. If the payment is subject to an unexpired term, the seller may only demand guarantee of payment [LCM 97]. A seller shall be entitled to recover property sold pursuant to a promissory agreement or to a purchase agreement that lacks all formalities required by law. The debtor, with the conciliator’s authorization, may prevent such recovery by demanding that proper formalities be met (through an actio pro forma) or if the action to demand annulment due to lack of formality is otherwise extinguished (e.g., by the lapse of the applicable statute of limitations) [LCM 93, 96]. A seller of unpaid property that is en route for delivery to the debtor may oppose delivery by changing the delivery consignment (if permitted by law) or by stopping the delivery, even if the seller does not have documentation to effect a change to delivery consignment [LCM 94]. In the case of the sale of property on a multiple-delivery basis (e.g., under a supply agreement) where some of the deliveries have been made but remain unpaid, the debtor must make payment for such deliveries [LCM 98]. It is unclear whether this provision of the Insolvency Law refers to all cases, or only when debtor or conciliator has elected to assume the contract. 2. Sales In the case of purchase agreements where the debtor is a seller of realty, the purchaser shall be entitled to demand delivery of such realty after paying its price [LCM 95]. 35 Please refer to the Appendix for a summary of the differences between real property and chattel. White & Case 53
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chattel 35 ) unless its price is paid for or guaranteed [LCM 93]. Similarly, a purchaser<br />
debtor cannot demand delivery <strong>of</strong> unpaid goods if the debtor does not pay or<br />
guarantee payment for the purchase price [LCM 96]. If the payment is subject<br />
to an unexpired term, the seller may only demand guarantee <strong>of</strong> payment [LCM 97].<br />
A seller shall be entitled to recover property sold pursuant to a promissory<br />
agreement or to a purchase agreement that lacks all formalities required by law.<br />
The debtor, with the conciliator’s authorization, may prevent such recovery by<br />
demanding that proper formalities be met (through an actio pro forma) or if the<br />
action to demand annulment due to lack <strong>of</strong> formality is otherwise extinguished<br />
(e.g., by the lapse <strong>of</strong> the applicable statute <strong>of</strong> limitations) [LCM 93, 96].<br />
A seller <strong>of</strong> unpaid property that is en route for delivery to the debtor may oppose<br />
delivery by changing the delivery consignment (if permitted by law) or by stopping<br />
the delivery, even if the seller does not have documentation to effect a change to<br />
delivery consignment [LCM 94].<br />
In the case <strong>of</strong> the sale <strong>of</strong> property on a multiple-delivery basis (e.g., under a supply<br />
agreement) where some <strong>of</strong> the deliveries have been made but remain unpaid, the<br />
debtor must make payment for such deliveries [LCM 98]. It is unclear whether<br />
this provision <strong>of</strong> the <strong>Insolvency</strong> Law refers to all cases, or only when debtor or<br />
conciliator has elected to assume the contract.<br />
2. Sales<br />
In the case <strong>of</strong> purchase agreements where the debtor is a seller <strong>of</strong> realty, the<br />
purchaser shall be entitled to demand delivery <strong>of</strong> such realty after paying its<br />
price [LCM 95].<br />
35 Please refer to the Appendix for a summary <strong>of</strong> the differences between real property and chattel.<br />
<strong>White</strong> & <strong>Case</strong><br />
53
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