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What function does an anti-set-off clause serve? Will an anti-set-off clause survive repudiation of the contract?

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Published on LexisPSL on 25/09/2018

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

  • What function does an anti-set-off clause serve? Will an anti-set-off clause survive repudiation of the contract?

Set-off is the discharge of reciprocal monetary obligations where one monetary amount is discharged to the extent of the other monetary amount. There are five main types of set-off:

  1. independent set-off (sometimes known as legal set-off or statutory set-off). This operated as a procedural defence which used to set-off reciprocal claims that are independent or unconnected. See Practice Note: Independent set-off and transaction set-off

  2. transaction set-off (also known as equitable set-off): when two claims are so closely connected that it would be unjust allow one party to enforce its claim without giving credit to the claim of the other party

  3. contractual set-off is a right of set-off that has been created by an express contractual agreement. It is used when contracting parties want to extend or limit set-off rights which are available under general law. See Practice Note: Contractual set-off

  4. insolvency set-off, is a right of set-off that arises as a result of the insolvency legislation

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