Q&As

Can a business benefit from a set-off agreement where it acts as both supplier to and customer of another business?

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Published on LexisPSL on 27/06/2016

The following Commercial Q&A provides comprehensive and up to date legal information covering:

  • Can a business benefit from a set-off agreement where it acts as both supplier to and customer of another business?

Can a business benefit from a set-off agreement where it acts as both supplier to and customer of another business?

Firstly, see Practice Note: Managing a trading relationship with a business in financial difficulty. This outlines that general trade creditors are usually the last to know if a company is struggling as it not always easy to evaluate whether the finance director's assurance that 'the cheque is in the post' is in fact a true statement, or is masking a much bigger problem. For more information, see Checklist: Contract risk management clauses—checklist.

Should you wish to proceed with agreeing to set-off, see the Lexis®PSL Construction clause bank: Set-off clause which may be helpful.

There are a number of various rights of set-off that currently exist under English law, often with no need for a contractual set-off clause:

  1. legal set-off allows a court to give a judgment for the balance due between two parties for reciprocal claims which are unconnected to and independent of each other. Legal set-off can only apply where both of the claims are

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