Conclusions
Both the pagaré and the pledge are effective tools for mitigating commercial risk1 when lending or selling on credit. One is
not better or worse than the other; they only serve different
purposes. While the pagaré proves a debt through an unconditional promise and allows a privileged action, it lacks certainty
in securing assets for execution. The pledge creates a security
interest in specific assets, which the creditor can repossess and
sell through a special action. Nonetheless, the creditor will
have a heavy burden in proving the outstanding balance,
which is less so in the case of a pagaré. Thus, more than one
tool displacing the other, they complement one another and
should be used together in any credit policy. Creditors looking
to enhance their position in Mexico should seriously consider
their use on a daily basis, as per the following guidelines:
1.
Forms. Pagaré and pledge forms should be drafted by legal
counsel in Mexico, reinforcing them through key terms.
2.
Policy for Security. Creditors should make it a policy to
request from debtors such security devices:
(a) at all times, waiving such requirement on limited
cases by authorization of the credit manager; and
(b) when possible, by ratification before a notary who
will confirm the authority of the individual signing.
3.
RUG Filings. Creditors should make it a policy to
immediately file all pledge forms or clauses at the RUG.
4.
Credit Policy. In addition to using security, creditors
should create a specific and comprehensive credit policy
for transactions in Mexico, where the following issues
are addressed:
(a) ue diligence and investigation of prospects;
d
(b) redit application with terms and conditions of sale;
c
(c) proper documentation for proving transactions and
outstanding balance.
Collection Policy. Creditors should keep a tight collec5.
tion policy and act fast upon default of debtors, making
smart decisions for litigation based on an objective
assessment of each case.
1. See Managing Risks on Credit Sales into Mexico, printed in the June
2008 issue of Business Credit, available in magazine archives at www.
nacm.org or at http://www.hmhlegal.com/Pdfs/Managing_Risks_on_
Credit_Sales_Into_Mexico.pdf.
Romelio Hernandez is president at HMH Legal, a professional corporation specializing in credit and collection services in Mexico. Based in
Tijuana, Mexico, he works extensively with foreign exporting companies, providing assistance with out-of-court and legal collection efforts
throughout Mexico and secured transactions. Romelio has practiced law
in Mexico since 1997 and holds a master’s degree in Comparative Law
(LL.M.) from the University of San Diego School of Law. He can be
reached at [email protected], or visit www.hmhlegal.com.
The information in this article is not, nor is it intended to be legal
advice. It is imperative that any action you undertake be done on the
advice of counsel, and not based solely upon this article.
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