The Mexican promissory note (pagaré) is a useful device not only to memorialize a loan of money to a Mexican person or entity, but also as a type of guaranty of payment obligations under a contract for the sale of goods or services.  

In the guaranty context, for example, a U.S. company selling goods to a Mexican company that refuses to make advance payment or provide a standby letter of credit or other robust payment insurance may require that the Mexican company issue a promissory note to the U.S. seller concurrent with each purchase order.  Since the promissory note must be enforced in order to be a useful guaranty and the maker must have sufficient assets following enforcement to support the obligation,  is not the best payment insurance, but it is an additional tool for U.S. companies to consider when other more preferable payment guaranties are unavailable.  As discussed below, the expedited enforcement proceeding available to the payee under a Mexican promissory is an additional benefit of this instrument. 

Elements of a Mexican Promissory Note (Pagaré)

Article 170 of Mexico’s General Law of Negotiable Instruments (Ley General de Títulos y Operaciones de Crédito) sets forth the elements that must be included in a promissory note under Mexican law, which are generally summarized as follows:

1. A statement that it is a promissory note;  
2. The unconditional promise by the maker to pay an amount certain; 
3. The name of the person/entity to which payment must be made;  
4. The date(s) and place that payment(s) are due (or if the date of payment is not stated, the promissory note will deemed to be payable on demand by the payee and/or the payee may indicate in the note that it is payable on demand); 
5. The date on which and place at which the promissory note is signed; and 
6. The signature of the maker or the signature of the person who signs the note on the maker’s behalf.

If the maker is a natural person, the payee should require that the maker (rather than a third party representative of the maker) sign the promissory note and the payee should retain a copy of the maker’s official identification for signature comparison.  If the maker is an entity, the payee should require that the natural person acting on behalf of the entity deliver to the payee an original or certified copy of a valid power of attorney evidencing such person’s authority to execute the promissory note.  The payee should not accept the promissory note until the power of attorney has been reviewed and approved by Mexican legal counsel.

The note may include interest and other terms permitted by the General Law of Negotiable Instruments.  The payee should not modify the promissory note following execution or leave any terms of the note blank for insertion by the payee following execution because such actions may make the note unenforceable and/or give rise to defenses to enforcement by the maker.

Enforcement Benefits of a Mexican Promissory Note (Pagaré)

A lawsuit for collection of a promissory note may be commenced by a summary debt collection proceeding (juicio ejecutivo mercantil), which is an expedited legal proceeding and is considerably faster than an ordinary legal proceeding in Mexico. In a summary proceeding, a court generally issues final judgment within 6-12 months of the date the lawsuit is filed, assuming that the maker contests the amount the payee alleges to be owed under the note in the first stage of the lawsuit.  (Judgment may be issued within 6 months of the date the lawsuit is filed if the maker does not contest the amount alleged by the payee to be owed under the note.)

An additional and important benefit of a summary proceeding is that the court permits pre-judgment attachment of the maker’s assets upon the payee’s giving of notice of the lawsuit to the maker. An ordinary proceeding, in contrast, can take between 10 and 16 months for final judgment to be issued by the court and attachment of the maker’s assets does not occur until the conclusion of the proceeding following the issuance of judgment.

Sometimes U.S. banks and businesses that lend or advance money to Mexican borrowers, for practical or business reasons, seek to have the Mexican borrower sign a Mexican promissory note (pagaré) with an effective date that is either before  or after the actual date of signature of the pagaré. 

For example, an effective date on a pagaré that is before the actual date of signature might be used to enable the lender to evidence a debt of the Mexican borrower that arose because of money advanced before the actual signature date of the pagaré.  Similarly, an effective date on a pagaré that is after the actual date of signature may be used to enable the lender to evidence a future debt of the borrower that will arise if some event does not incur in the future (e.g., the Mexican borrower does not pay the lender’s invoices).

Article 170 of Mexico’s General Law of Negotiable Instruments (Ley General de Títulos y Operaciones de Crédito), which lists the elements required to create a valid pagaré, provides that, among other elements, a pagaré must include the date on and place at which the pagaré was signed by the borrower.

Accordingly, to avoid any possible argument by the Mexican borrower in a collection lawsuit on the pagaré by the lender that the pagaré is defective because it is not dated the actual date of signature or that the lender altered the pagaré post-signature, the most prudent course of action for the lender is to have the debtor sign the pagaré on the actual date that appears on the pagaré, whether the date is (a) pre-printed on the pagaré by the lender or (b) handwritten on the pagaré by the borrower or the lender.

If the lender must date the pagaré before or after the actual date of signature, one alternative for the lender would be to pre-print the date the lender wishes to include on the pagaré, whether such date is before or after the actual date of signature, BEFORE the pagaré is signed by the borrower.  However, it is conceivable that this alternative could give rise to an argument by the borrower in a collection lawsuit by the lender that the pagaré is defective because it is not dated the actual date of signature contrary to Article 170.  In other words, there is some risk to the lender associated with this alternative.

A much less favorable alternative if the lender must date the pagaré before or after the actual date of signature is to leave the date of the pagaré blank and fill-in the desired date, whether such date is before or after the actual date of signature, AFTER the pagaré is signed by the borrower.  This alternative, which is not recommended, is far more likely than the previous alternative to give rise to an argument by the borrower in a collection lawsuit by the lender that the pagaré is defective because it is not dated the actual date of signature or because the lender altered the on the pagaré post-signature violation of Article 170.