Contracts and Securities in Commercial Law

Contracts

Named Contracts

These are contracts that the law designates with a specific name to differentiate them from other agreements and identify them simply by that name.

Unnamed Contracts

These are contracts that the law does not give a specific name to, even though their provisions are fulfilled.

Purchase Agreement

The seller transfers ownership of goods to a buyer and is obligated to provide a warranty against eviction should the buyer experience such an issue.

Eviction

Partial or total deprivation of the purchased goods.

Warranty

Compensation from the seller to the buyer when eviction occurs.

Contract of Carriage

The carrier agrees to transport goods and deliver them to the consignee at the specified time and place, following the route indicated in the consignment note.

Carrier

The person or entity transporting the goods.

Shipper

The person or entity delivering the goods to the carrier.

Consignee

The person or entity who receives and accepts the goods.

Transport Document

Defines the characteristics of the goods, name and address of the consignee, etc.

Trust Contract

A contract where a person (settlor) transfers property, money, or rights (present or future) to another person (trustee) to manage or invest them for the settlor’s benefit or the benefit of a third party (beneficiary).

  • Settlor: Transfers specific assets to the trustee. Must have full ownership of the transferred property.
  • Trustee: Manages the assets with prudence and diligence, acting in the best interest of the beneficiary. Can be a natural or legal person. In Mexico, the trustee must be a legal entity authorized under the Credit Institutions Law.
  • Beneficiary: The intended recipient of the trust assets. Often the same person as the settlor, but can be a third party.

Insolvency

A legal status for companies that have defaulted on more than 35% of their obligations or lack assets to cover 80% of their due obligations. It’s a mechanism to address crisis situations.

Visitor

Appointed by the Institute of Commercial Specialists.

Adjudicator

Represents the interests of the merchant and aims to support them by negotiating payment arrangements with creditors.

Trustee

Responsible for the bankrupt merchant’s assets, administration, and security. Oversees the sale of assets to pay creditors.

Auditor

Represents the interests of the creditors and monitors the process.

Obligations and Shares

Debentures

Debt securities issued by corporations, representing the individual participation of their holders (bondholders) in a collective loan provided to the issuing company.

Issuance of Bonds

Involves two parties: the issuer (the company seeking the loan) and the bondholders (the lenders).

  • Issuer: The company that receives the collective loan in exchange for issuing the bonds.
  • Bondholder: The person who lends money to the issuer in exchange for the bonds.

Bond issuance must be authorized by the Extraordinary Shareholders’ Meeting, recorded by a notary public, and registered in the Public Registry of Commerce. If the issue is secured by a mortgage, the minutes must also be registered in the Public Property Registry.

Certificate of Deposit and Pledge Bond

The Certificate of Deposit is a debt instrument issued by warehouses, proving ownership of goods or commodities deposited there. The Pledge Bond represents a lien on the goods or property specified in the corresponding Certificate of Deposit.

Data Included in Both Documents

  • Mention of being a Certificate of Deposit or Pledge Bond, respectively.
  • Warehouse name and signature of the authorized person.
  • Deposit location.
  • Date of issuance.
  • Specification of deposited goods or property (nature, quality, quantity, and other identifying characteristics).
  • Deposit period.
  • Depositor’s name.

Additional Data in the Pledge Bond

  • Name of the Pledge Bond payee or indication of delivery to the carrier.
  • Credit amount guaranteed by the bond.
  • Agreed interest rate.
  • Loan maturity date (cannot be later than the deposit expiry date).
  • Signature of the certificate holder upon first negotiation of the bond.
  • Statement signed by the warehouse or lending institution involved in the first negotiation of the bond, confirming the corresponding entry in the Certificate of Deposit.

Credit Rating or Avió

Contract where the lender provides the borrower a certain amount of money for purchasing raw materials and paying salaries and wages.

Lender

The person providing the credit.

Borrower

The person receiving the credit.

Opening Credit

Contract where the lender offers the borrower a certain amount of money to use during a specified period, with the obligation to repay it under agreed terms and pay interest and expenses.

Credit Card

An instrument used within a credit contract. A credit contract can exist without a credit card, but a credit card cannot exist without a credit contract.

Account

Contract where account holders make reciprocal remittances of goods over a certain period, after which they settle their claims. When no specific payment timeframe is established, the law sets a maximum of 46 months.

Sales Contract

Agreement to create, modify, or extinguish rights and obligations, primarily commercial.

Essential Elements of a Contract

  • Will: Demonstration of intent to create legal consequences.
  • Purpose: The objective of the contract must be lawful and humanly possible.
  • Solemnity: When required, the contract must adhere to specific formalities for full legal effect.

Elements of Validity

  • Absence of Defects of Will: Consent must be freely given.
  • Legal Capacity: Parties must have the capacity to enter into a contract.
  • Form: When required by law, contracts must be in writing (formal). Otherwise, verbal consent is sufficient (consensual).