Edited By: William Johnston, Thomas Werlen, Frederick Link
- Banks and cross-border issues — Guarantees and security — Monetary obligations — Contractual set-off — Judicial set-off
This chapter discusses the law of set-off in Mexico. Under Mexican law, the right of set-off is a form of payment of obligations by which cross-claims may be extinguished up to the amount of the smaller claim. Set-off is not treated as a security interest in Mexico. In order for a set-off to be valid, it is not necessary to satisfy the formal requirements for security interests including executing specific security agreements such as security trusts, pledges, or mortgages. The chapter first considers set-off between solvent parties, focusing on automatic set-off and contractual set-off, before analysing set-off against insolvent parties. In particular, it examines the relevant provisions of the Bankruptcy Law with respect to outstanding obligations resulting from financial derivatives, reportos, and securities lending transactions, along with the retroactivity period for such transactions. Finally, it looks at set-off issues in a cross-border context.