Effects of COVID-19 on Contracts

Effects of COVID-19 on Contracts

Last year, a state of alarm was declared around the world about the health crisis caused by COVID-19. Therefore, a series of decrees, regulations and measures of a sanitary and legal nature have been issued in order to minimize or control the effects that this sanitary crisis has had, that is why countless questions have automatically arisen about the impact that COVID-19 has had on both companies and individuals in meeting their obligations.

One of the main effects that we have experienced in the current situation in the legal field is related to the contractual aspect. Although none of the regulations or decrees that have been issued so far alter as such the legal framework of contracts and obligations between individuals, however, some of the clauses contained therein cannot be carried out or complied with in accordance with the agreed.

Taking the foregoing into account, it is necessary to analyze those scenarios in which the law itself allows to release from compliance with the obligations generated through the contracts due to unforeseen circumstances or force majeure or, request that the parties’ obligations be reestablished, considering that the existence of this type of unforeseen situations may cause onerous charges for any of the parties.

In the same way, it must be considered what the parties that have entered into the contract, have stipulated in it on the cases and effects if any event of force majeure or any event that makes it impossible to comply with the obligations will be presented.

As a general rule, the parties are obliged to fully comply with what has been stipulated in the contract, however, for those cases in which they have not indicated any precautionary clause or a scenario in which they include cases of force majeure, the parties of Common agreement could establish what would be the next step and even enter into an amendment agreement on the original contract in order to formally agree on these changes.

Regarding the possibility of making a modifying agreement on the original contract, in order to modify or resolve any point on certain clauses of the contract, it may not be applicable to those obligations that have existed prior to force majeure events, however, it may be applicable on the obligations that are still pending to be fulfilled, as long as the parties are not in default or that at the time they have acted fraudulently.

In conclusion, the current health situation derived from the effects of COVID-19 has had and will have a relevant impact on the contractual obligations of individuals, as well as on future negotiations that are carried out on contracts. In the contracts that have already been signed and that have already generated obligations for the parties, the actions to be followed will have to be verified in order to validate which obligations can be fulfilled even under different conditions and which will be subject to a modification under a modifying agreement, the above in order to avoid damage and provide the greatest benefit to the parties.

Melissa Sanchez

Gloria Ponce de León & Hernández

Legaltech, the importance of its implementation in México

Legaltech, the importance of its implementation in México

The phenomenon of LegalTech, or technology applied to the commercialization and provision of legal services, is becoming more and more relevant worldwide, since one of the highlights of LegalTech is the versatility of adaptation to any area of law, so its extension and application is much more general and focuses directly on practicality, analyzing and solving problems such as lack of communication, disorder, delays, the impossibility of attending certain places due to health risks, among others.

The implementation of technology in any sector increases productivity and quality, since technology always brings with it the acceleration of processes. Legal innovation is the big idea under which the transformation of the sector is taking place. Daniel Katz (professor of law at Illinois Tech University of Chicago Kent College of Law), has defined the four pillars of innovation in the legal sector as:

  • Law: knowledge and mastery of substantive law.
  • Technology: data analytics platforms, artificial intelligence, computational capability and knowledge management
  • Design: process improvement, user experience, design thinking, and project management;
  • Delivery: business models, regulation and legal marketing.

Although LegalTech is already present in Mexico, the level of penetration in the legal system and in the operators of the sector is still very incipient, since the evolution of LegalTech in the country has not had the digital transformation that took place a couple of decades ago in the United States, Europe and Asia.

The pandemic derived from COVID-19, gave a clear sample of the delay that exists in the implementation of technology in the legal area, a clear example of this is the non-existence of the concept of “Telework” in the Mexican legislation, whose guidelines were not established until the beginning of 2021 and that contemplates a reform to the Federal Labor Law.

At present, many Mexican citizens have to manage their affairs without access to legal counsel, or with legal counsel of heterogeneous quality and at non-transparent prices. This situation prevents the legal system as a whole from fully deploying the desired effects of clarity, certainty and stability, which favor, both at an individual and social level, legal security, the protection of private property and fundamental rights.

Therefore, it is of utmost importance a professionalization in LegalTech and a structure or investment capacity by the Mexican State to potentiate business niches and find benefits such as online legal services, automation of online legal services, software development for the legal sector, technology-assisted review and the creation of artificial intelligence algorithms to find errors in texts.

Génesis Moyeda Salazar

Gloria Ponce de León & Hernández

Amendment in matter of Outsourcing

Amendment in matter of Outsourcing

Currently in Mexico the amendment proposal presented by the Federal Executive is being analyzed in relation to the figure of subcontracting, that was incorporated through the amendment to the Federal Labor Law, published in the Official Gazette of the Federation in 2012, as it is regulated in its articles 15 -A, 15-B, 15-C and 15-D. However, on November 12, 2020, the amendment proposal in outsourcing was presented, which aims to prohibit the outsourcing of personnel, for this purpose, this initiative establishes the reform of the articles of the Federal Labor Law, which, in general , contains the following:

  1. Subcontracting: Prohibiting the subcontracting of personnel, consisting of a natural or legal person providing or making their own workers available for the benefit of another.
  2. Specialized services and works: These include formalities and requirements that any natural and legal person must fulfill in order to contract the provision of specialized services or the execution of specialized works, such as the formalization of a contract in which the object of the services to be provided or the works to be carried out, and the number of workers who will participate to comply with it, this in accordance with the principle of legal certainty that covers this type of act and, therefore, to guarantee the observance of the provisions applicable in terms of working conditions, safety, health and environment at work.

The contracting party will be jointly and severally liable for labor obligations in the event that the contractor fails to comply with its workers.

In addition, they must have the authorization of the Ministry of Labor and Social Welfare, in which they must prove the specialized nature of the service they provide. Once the reference authorization has been obtained, the contractors will be registered in the registry of providers of specialized services or works.

  1. Employment agencies: The figure of the “Intermediary” is defined as that natural or legal person who intervenes in the process of hiring personnel to provide services to an employer. Said services may include the recruitment, selection, and training of personnel, among others.

In no case will the intermediary be considered as employer, since this character will only be held by those who benefit from the services.


Those who fail to comply with the aforementioned subcontracting rules and / or benefit from the subcontracting of personnel or the provision of specialized services or works, will be entitled to a fine of 2,000 to 50,000 times the UMA (Unit of Measurement and Update, for its acronym in Spanish) and other responsibilities that may arise. compliance with applicable legislation.

Regarding the “insourcing” if the amendment of section IV of article 15-I of the LFT is approved, it would prohibit the modality of internal subcontracting (services provided by a company related to the contracting party), it is considered essential for the operation of various support or service areas for companies.

In tax matters, the tax amendment proposes the following 2- two most relevant assumptions:

  • Tax effects may not be given, the value added tax may not be considered creditable for purposes of expenses related to payments or compensation made for the concept of “subcontracting of personnel”, in the terms of labor legislation

  • In the event that it is proved that the services correspond to specialized services, or specialized works are executed, they may be deducted for tax purposes on those expenses related to subcontracting, provided that those payments or compensations made for said services are related to services in those for which contractors have the corresponding authorization from the labor authority.
Challenges for organizations derived from the Home Office Regulation

Challenges for organizations derived from the Home Office Regulation

It is well known for everybody that there are complicated challenges what the commerce is going day to day, from keeping al its clients, to deliver its labor responsibilities with their employees, with the new modification to the Federal Labor Law that came into force this month, there are new challenges added to the list in those circumstances where the employees spend at least 40% of his working hours in the modality of the home office.

These modifications obey a number of changes made by the conditions in which the employees are delivering his working hours with all the changes that the population in general has been obligated to take. This new modality of work, in most of the cases, generate more spending that previously was not in the budget, and also releases the employer from some payments that were made by him and for the moment there are no longer essential needs

In all these modifications made to the Federal Labor Law exists changes directed to regulate the home office, where the authority is looking to give the employee more facilities to be able to have enough tools to deliver with his labor responsibilities, where the next ones distinguished:

  • Payment for telecommunication and electricity. There refers only to the proportional part of what is consumed by the employee during his working hours and what is extra for staying home more time than they used to.
  • Constant training to complete successfully his working hours once they are installed with the modality of home office.
  • Those who gets disconnected after his working hours ended can not be penalized, however, there are the very tiny line between leaving things undone and fulfilled responsibilities.

 As in many cases, the way to make this work for both parties involved is to find the right communication and established a written agreement keeping in mind the extraordinary circumstances we are all going through.

Antonio Qurioga Trápala

Gloria Ponce de León & Hernández

The use of Electronic Signature increases in companies after Covid-19

The use of Electronic Signature increases in companies after Covid-19

Almost a year has passed since in March 2020 the Mexican Government and the entire world itself ordered the confinement of its population in order to avoid the contagion and spread of the new virus SARS-CoV-2 (COVID-19), this brought As a consequence, the closure of offices, schools, shopping centers, Courts of Justice and any other non-essential activity, which, as we know, continue to be closed to date.

This resulted in the almost mandatory acceleration of the use of electronic signatures, mainly in companies and Courts of Justice, with this, the development of technologies and applications (DocuSign, Adobe Sign, LegaSign, etc.) that allow the validity of the documents that are signed through them.

In a previous article we talked about the myths and realities of the electronic signature and from that date to today its use has increased considerably, since most of the companies, whether large or small, bet on the total digitization of the documents that they use daily saving time and costs.

The sectors that are benefiting the most from this tool are legal and accounting firms, insurance companies, the real estate sector, Human Resources departments, football clubs who have implemented the internal use of electronic signatures in their business model, becoming an essential tool, even improving communication between companies.

Electronic signature simplifies document workflows between departments in a company such as finance, operations, human resources, and planning.

It has become clear to us that, without a doubt, the habits of the world population since the COVID pandemic have changed, accelerating changes in the way of buying and consuming, in a study carried out by Forbes Mexico magazine it is indicated that the population is currently betting for consuming companies that prioritize health care and the environment, for example reducing the use of paper in their transactions, thus avoiding contact, so people prefer to digitally sign any document than physically.

In conclusion, the trend towards caring for the environment, zero contact between people, the growth of teleworking and the scarce mobilization among the population has accelerated the use of electronic signatures, causing a large number of large and small companies to adopt it. At Gloria Ponce de León & Hernández we have specialized advice on issues of electronic signature implementation for your company and its implications, we even have technological tools at your fingertips to facilitate the signing of your contracts and any other document. If you have any questions, come to us and one of our specialists will provide you with the advice you require.

Carolina Áviles

Gloria Ponce de León & Hernández