Mexico: Construction – Country Comparative Guides

Is your jurisdiction a common law or civil law jurisdiction?

Mexico is a civil law jurisdiction.
What are the key statutory/legislative obligations relevant to construction and engineering projects?

When speaking about private contracts, they are regulated by the Commercial and Civil Codes of each one of the 31 Mexican states, as well as the federation. Also they are regulated by the federal, local and municipal regulations that may apply.

Regarding public construction contracts, they are regulated by the Government Procurement and Public contracts of each one of the 31 Mexican states, as well as the federation. Also they are regulated by the federal, local and municipal regulations that may apply.
Are there any specific requirements that parties should be aware of in relation to: (a) Health and safety; (b) Environmental; (c) Planning; (d) Employment; and (e) Anti-corruption and bribery.

Federal, local and municipal authorities request different requirements from contractors in these areas.

In connection with health and safety, there is a national standard called the NOM-031-STPS-2011 that applies to all construction projects in Mexico. Regarding environmental issued there are regulations at federal, local and even municipal governments; Planning has special federal and local regulations that may affect the development of projects. Regarding anticorruption and bribery, there are restrictions on the Criminal Code as well as other Administrative regulations.
What permits/licences and other documents do parties need before starting work, during work and after completion? Are there any penalties for non-compliance?

Different than other countries, Mexico does not require companies to have specific licenses in order to start working. Regulations may only require the legal establishment of the company, as well as tax authorizations. However, in order to start the works, permits and licenses must be obtained, in connection with the specific projects, their location and compliance with other matters.
Is tort law or a law of extra contractual obligations recognised in your jurisdiction?

Yes, they are called extra-contractual obligations and they are part of the Civil Code system that protects affected parties of matters that may affect beyond the contract.
Who are the typical parties to a construction and engineering project?

In Mexico, an Employer and a Contractor are the typical parties involved in a construction contract. Other parties such as the “supervision”, that is a technical supervisor may be needed. In some contracts, a Contract manager can be used.
What are the most popular methods of procurement?

The traditional method is the most used (Design provided by Employer, Contractor builds). Years ago, Design-Build was widely used but it started to diminish. Nowadays Design-Build is having exposure again. On some plants and other sophisticated projects EPCs are being used. Finally, PPPs, have not been as widely used and successful as they are expected.
What are the most popular standard forms of contract? Do parties commonly amend these standard forms?

Mexico does not use standard forms of contract. In some cases, FIDIC contracts are used, but not widely.
Are there any restrictions or legislative regimes affecting procurement?

No. Mexico has a very open and unregulated system.
Do parties typically engage consultants? What forms are used?

Yes, consultants are used commonly. As said, forms are not used.
Is subcontracting permitted?

Absolutely yes.
How are projects typically financed?

Private projects may involve the participation of banks and equity or a mixture of them. Public projects are usually financed by government budget.
What kind of security is available for employers, e.g. performance bonds, advance payment bonds, parent company guarantees? How long are these typically held for?

The common securities are: Advance payment bonds for the 100% of the advance payment; performance bonds for 10-20% of the price of the contract, and hidden defects bonds for 10% of the amount of the contract.
Is there any specific legislation relating to payment in the industry?

No.
Are pay-when-paid clauses (i.e clauses permitting payment to be made by a contractor only when it has been paid by the employer) permitted? Are they commonly used?

Pay when paid and pay if paid clauses are used. Unfortunately there are no regulations that regulate them.
Do your contracts contain retention provisions and, if so, how do they operate?

Yes. These provisions are usually included in order to guarantee specific obligations under the contract such as payment for subcontractors, payments owed to authorities and other kind of payments in case that the contractor does not comply with them, and the Employer has to face them.
Do contracts commonly contain delay liquidated damages provisions and are these upheld by the courts?

Yes.
Are the parties able to exclude or limit liability?

Yes.
Are there any restrictions on termination? Can parties terminate for convenience? Force majeure?

There are no restrictions on termination. However parties can agree different terms. Usually employer has the right to terminate for convenience and contractor does not. Termination for force majeure may be regulated but not really used.
What rights are commonly granted to third parties (e.g. funders, purchasers, renters) and, if so, how is this achieved?

It depends on the matter. Happy to discuss with readers specific examples if needed.
Do contracts typically contain strict provisions governing notices of claims for additional time and money which act as conditions precedent to bringing claims? Does your jurisdiction recognise such notices as conditions precedent?

In Mexico, notices as conditions precedent to bring claims are not used. If they are included, the Mexican courts may recognize them, but as far as we are award, there are no decisions on this mater.
What insurances are the parties required to hold? And how long for?

Civil Responsibility and damages in general; Auto and Workers insurance. Also professional liability in case of designers and consultants.
How are construction and engineering disputes typically resolved in your jurisdiction (e.g. arbitration, litigation, adjudication)? What alternatives are available?

By litigations or arbitration. Adjudication is not recognized nor used.
How supportive are the local courts of arbitration (domestic and international)? How long does it typically take to enforce an award?

Fully supportive.
Are there any limitation periods for commencing disputes in your jurisdiction?

The general statute of limitations is 10 years.
How common are multi-party disputes? How is liability apportioned between multiple defendants? Does your jurisdiction recognise net contribution clauses (which limit the liability of a defaulting party to a “fair and reasonable” proportion of the innocent party’s losses), and are these commonly used?

This is not something that is discussed in in the Mexican regulations, but may be part of discussions in a court or an arbitration, and output depends on the matter.
What are the biggest challenges and opportunities facing the construction sector in your jurisdiction?

The biggest employer in Mexico is the Government, which in the past years have reduced dramatically the participation of contractors, by giving to the Army the performance of projects.
What types of project are currently attracting the most investment in your jurisdiction (e.g. infrastructure, power, commercial property, offshore)?

As a consequence of nearshoring, we see an important increase of possibilities on industrial plants. Also there is a need for infrastructure in the water and energy sectors.
How do you envisage technology affecting the construction and engineering industry in your jurisdiction over the next five years?

Construction is very slow in implementing technology. However, we see more and more the use of electronic platforms, drones, and robots. We see an increase without any doubt.
What do you anticipate to be the impact from ongoing supply chain issues and the escalation of material costs over the coming year?

We think there is an important increase in this risk.

Is your jurisdiction a common law or civil law jurisdiction?

What are the key statutory/legislative obligations relevant to construction and engineering projects?

Are there any specific requirements that parties should be aware of in relation to: (a) Health and safety; (b) Environmental; (c) Planning; (d) Employment; and (e) Anti-corruption and bribery.

What permits/licences and other documents do parties need before starting work, during work and after completion? Are there any penalties for non-compliance?

Is tort law or a law of extra contractual obligations recognised in your jurisdiction?

Who are the typical parties to a construction and engineering project?

What are the most popular methods of procurement?

What are the most popular standard forms of contract? Do parties commonly amend these standard forms?

Are there any restrictions or legislative regimes affecting procurement?

Do parties typically engage consultants? What forms are used?

Is subcontracting permitted?

How are projects typically financed?

What kind of security is available for employers, e.g. performance bonds, advance payment bonds, parent company guarantees? How long are these typically held for?

Is there any specific legislation relating to payment in the industry?

Are pay-when-paid clauses (i.e clauses permitting payment to be made by a contractor only when it has been paid by the employer) permitted? Are they commonly used?

Do your contracts contain retention provisions and, if so, how do they operate?

Do contracts commonly contain delay liquidated damages provisions and are these upheld by the courts?

Are the parties able to exclude or limit liability?

Are there any restrictions on termination? Can parties terminate for convenience? Force majeure?

What rights are commonly granted to third parties (e.g. funders, purchasers, renters) and, if so, how is this achieved?

Do contracts typically contain strict provisions governing notices of claims for additional time and money which act as conditions precedent to bringing claims? Does your jurisdiction recognise such notices as conditions precedent?

What insurances are the parties required to hold? And how long for?

How are construction and engineering disputes typically resolved in your jurisdiction (e.g. arbitration, litigation, adjudication)? What alternatives are available?

How supportive are the local courts of arbitration (domestic and international)? How long does it typically take to enforce an award?

Are there any limitation periods for commencing disputes in your jurisdiction?

What are the biggest challenges and opportunities facing the construction sector in your jurisdiction?

What types of project are currently attracting the most investment in your jurisdiction (e.g. infrastructure, power, commercial property, offshore)?

How do you envisage technology affecting the construction and engineering industry in your jurisdiction over the next five years?

What do you anticipate to be the impact from ongoing supply chain issues and the escalation of material costs over the coming year?

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