The following Dispute Resolution guidance note provides comprehensive and up to date legal information covering:
Although it commonly arises in the context of disputes, and therefore litigation, set-off is essentially a matter of substantive law.
This Practice Note sets out the key factors relevant to determining whether a right to set-off exists, be it legal or equitable. Note, however, it does not consider set-off in the specific areas of bankers' set-off, insolvency set-off or abatement of rent, on which see Are there different types of set-off?
For guidance on pleading a set-off, see Practice Note: Pleading set-off.
At its most simple, a set-off may arise between two parties who owe each other monetary debts.
There are five main types of set-off:
independent set-off (also known as legal set-off or statutory set-off)
transaction set-off (also known as equitable set-off)
insolvency set-off, and
bankers' set-off (sometimes known as current account set-off)
Their main identifying characteristics are outlined in the Practice Note: Types of set-off.
For guidance on set-off in the specific banking and insolvency contexts and in relation to rent abatement, see the following Practice Notes and Q&A:
Set-off in finance transactions
What is the banker’s right of set-off?
Insolvency set-off—the position under the Insolvency (England and Wales) Rules 2016
Rent—set off and deductions
For consideration of the role of set-off within the construction industry, see Practice Note: Set-off in construction.
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