Commercial Penalties in Mexico: Late Fees and Agreements

Under the Federal Civil Code (effective 1 October 1932), commercial and civil agreements regarding punishment for default are governed by the principle of conventional penalties. Even though mercantile businesses operate in strong financial leagues (Business to Business), the laws protect even corporate institutions in courts under the mantle of general precedent. The real estate owner of a commercial or corporate zone has the right to seek a penal sanction if the delayed owed quotas fall from very high rents—without crossing the boundary of illegally proscribed and usurious charges (prohibited under Art. 21.3 of the American Convention on Human Rights) that the Power of the judges could lower and mutilate under amparos. Under Art. 1843 of the Federal Civil Code, which is supplementary to the Commercial Code, the conventional penalty (cláusula penal) cannot exceed the value or amount of the principal obligation.

1. Usury Also Exists at the Corporate Level

Historically errant or falsely there was a generally propagated legal commercial and civil myth in popular culture when thinking about commercial laws or private rents. They thought: "You can fine an S.A. de C.V. mercantile entity in interest with infinite percentages per month without a ceiling because a business does possess infinite cash flows and a Civil Code allows no-quarter agreements".

The Mexican Supreme Court in 2014 (Jurisprudence 1a./J. 46/2014) and subsequent theses invalidated any similar principle for any physical or legal person. It is unanimous, the entire national spectrum rejects and considers Unconstitutional a debt where "Penalties or Fines Rates result openly Exploitative and excessive or abusive affecting the productive operative society without a fair equitable limitation". Under Art. 1843 of the Federal Civil Code, the penalty cannot exceed the value of the principal obligation. A civil court will forcefully lower de facto very high mercantile penalties that are found to be "notoriamente usuraria" (notoriously usurious).

2. Prudent and Justifiable Rate Types for Businesses

To maintain total rigor and imperative upon the corporate that delays quotas and for the sake of mutual judicial respect of the owner's financial coffers, interest rates must remain within non-abusive limits to avoid judicial reduction. Pursuant to SCJN Jurisprudence 1a./J. 46/2014, judges are required to analyze interest rates ex officio and reduce them if they are found to be exploitative.

• Statutory Default Rate: In the absence of a specific pact in the lease agreement, Art. 362 of the Commercial Code sets the default interest rate at 6% annually for mercantile acts.

• Institutional Indexed Rates: Many corporations define interest relative to the TIIE (Interbank Equilibrium Interest Rate) plus additional differential points. This aligns the penalty with the country's banking system, helping shield it as a non-usurious measure that is healthy and exigible in lawsuits against the defaulter or solidary guarantors.

3. Operative Administrative Limits (Prohibition of "Self-Help")

While landlords often seek swift deterrents against slow payments, they must avoid "autotutela" (taking the law into one's own hands), which is strictly prohibited under the Mexican Constitution.

Prohibition of Self-Help (Autotutela): "Under Article 17 of the Political Constitution of the United Mexican States, individuals are prohibited from exercising justice by themselves or using violence to claim their rights. Landlords may not suspend essential services, utilities, or direct connections (such as electricity, water, or internet) stipulated in the contract without a formal judicial order. Such actions may constitute the crime of 'despojo' and violate constitutional rights to due process."

Landlords must seek the regularization of payments through formal legal claims or mediation rather than temporarily cutting the infrastructure or utility access of the premises, as these extrajudicial measures are legally unenforceable and expose the owner to significant liability.

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