Set-off and netting

Set-off and netting

This overview is a guide to the Lexis+® Banking & Finance content within the Set-off and netting subtopic, with links to the appropriate materials.

What is set-off?

Set-off is a complex yet important concept in legal proceedings generally and for many different types of transaction.

In certain circumstances, set-off rights arise between two parties who owe each other monetary debts. Set-off is the discharge of reciprocal monetary obligations where one monetary amount is discharged to the extent of the other monetary amount.

A right of set-off allows one of the parties (Y) to apply the amount owed to it by the other party (X) against the amount owed by it to that other party (X), enabling Y to reduce or extinguish its liability to X eg:

If X Company and Y Company both owed each other the same amounts, set-off would extinguish both claims entirely.

Since both parties have reciprocal claims, either party can exercise a right of set-off.

The five main types of set-off

Set-off is available in certain specific circumstances:

•
independent set-off (also known as legal set-off or statutory set-off)

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