Contract interpretation
The rules for the interpretation of contracts are contemplated by civil law: the Federal Civil Code. The rules are implicit in all commercial obligations and should be observed when interpreting any contract. They are as follows:
-
if the terms of a contract are clear and leave no doubt about the intention of the contracting parties, the literal meaning will prevail;
-
if the words appear contrary to the evident intention of the parties, the latter shall prevail over the wording;
-
notwithstanding the generality of the terms of a contract, it is not to be comprehended therein different things or cases from those on which the parties intended to contract;
-
if a clause has several meanings, the provided interpretation must be the most suitable to fulfil the contract’s purpose;
-
the contract’s clauses must be interpreted as a whole in connection with the other clauses therein, giving an overall meaning to the group of clauses, some of which may be unclear;
-
words that have different meanings will be understood to refer to the meaning that is most in accordance with the contract’s nature and purpose; and
-
customs and usage can be considered to interpret the ambiguities therein.
When (1) the rules above are insufficient to interpret the true meaning of a provision in a contract, (2) it refers to accidental or secondary circumstances of a contract and (3) there is no legal consideration, it shall be interpreted in favour of the lower transmission of rights.
If the contract has consideration, the interpretation should be in favour of the greater reciprocity between the contracting parties.
If the main purpose of the contract is unclear, so that the intention of the contracting parties cannot be known, the contract will be null and void.
The rules above should be interpreted hermeneutically and can be summarised into three main categories: the literality of the clauses, the intention of the contracting parties and the effects that the contract may produce.
Based on the above, it can be concluded that, under Mexican law, contract interpretation is more literal than in common (case) law; therefore, attention must be devoted primarily to the language contained in the agreements to evidence the true intention of the contracting parties.
Notwithstanding the importance of the literal meaning of the wording, when in doubt, a contract should always be interpreted as a whole to identify its true purpose. Based on the above rules of interpretation, if the words of a contract seem contrary to the evident intention of the contracting parties, the latter will prevail over them. Further, the nature of a contract will always depend not on the title or name given to the agreement, which may be inaccurate or mistaken, but on the facts and acts consented by the parties therein.
Another example of the importance of the intentional element is the relevance of the parties’ conduct before, during its execution and while performing the obligations therein. With such conduct, the courts can analyse and deduce the parties’ true intention. For instance, when the parties execute a series of acts in a regular way, or when executed by a single party, there is an express or tacit acceptance by the other. Such behaviour indicates the true intention of the parties regarding the scope they wanted to give to the agreement.
Source: Martínez Algaba de Haro y Curiel
Symbiosis focuses its efforts in terms of export promotion, assistance on direct investment and internationalization of Canadian companies. With a deep cultural and business ties with the region and an understanding of the challenges presented to canadian clients doing business in Mexico. Our team is positioned to timely and efficiently assist clients providing counsel and the legal tools to assist in their possitioning in Mexico. For further information, please contact us or book a call/video conference with a member of our team, it would be our pleasure to meet you and talk about your project.
–
