Independent set-off and transaction set-off
Independent set-off and transaction set-off

The following Dispute Resolution guidance note provides comprehensive and up to date legal information covering:

  • Independent set-off and transaction set-off
  • Are there different types of set-off?
  • The fundamental characteristics of the right to set-off
  • Can you exclude a right of set-off?
  • Independent set-off—what is required?
  • Independent set-off—reciprocal claims which are unconnected to and independent of each other
  • Independent set-off—claims must be liquidated or capable of being ascertained with certainty at time defence is filed
  • Independent set-off—claims must be due and payable at time when defence is filed
  • Independent set-off requires claims to be mutual
  • Transaction set-off—what is it and when can it arise?
  • more

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.

Are there different types of 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:

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

  2. transaction set-off (also known as equitable set-off)

  3. contractual set-off

  4. insolvency set-off, and

  5. 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:

  1. Set-off in finance transactions

  2. What is the banker’s right of set-off?

  3. Insolvency set-off—the position under the Insolvency (England and Wales) Rules 2016

  4. Rent—set off and deductions

For consideration of the role of set-off within the construction industry, see Practice Note: Set-off in construction.

The fundamental