Q&As

Can equitable set-off apply to a situation where set off has been excluded expressly by terms of a contract between the parties?

read titleRead full title
Published on LexisPSL on 26/04/2016

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

  • Can equitable set-off apply to a situation where set off has been excluded expressly by terms of a contract between the parties?
  • Equitable set-off
  • Limiting rights of set-off
  • (a) Unequivocal words
  • (b) By implication

Can equitable set-off apply to a situation where set off has been excluded expressly by terms of a contract between the parties?

Equitable set-off

Equitable set-off arises when two claims are so closely connected that it would be unjust to allow one party to enforce its claim without giving credit for the claim of the other party where that party has been wronged.

The features of equitable set-off are that:

  1. there must be an inseparable connection between the claim and the cross-claim, and

  2. it must be manifestly unjust to refuse the set-off

Unlike in legal set-off, the claims do not have to be liquidated and a right of equitable set-off can be exercised outside court. Please see our Practice Note: Types of set-off for a more detailed comparison of legal set-off and equitable set off.

Limiting rights of set-off

Parties may contract out of equitable rights of set-off, but this can only be done by clear and unequivocal words, or a clear implication see:

Popular documents