set-off

There are three types of set-off. Each of them have a similar effect. In the words of Lord Hanworth MR in Re a Bankruptcy Notice (1934) Ch 431, a set-off is “something which provides a defence because the nature and quality of the sum so relied upon are such that it is a sum which is proper to be dealt with as diminishing the claim which is made, and against which the sum so demanded may be set-off”.

The three forms of set-off are:

1. Set-off at law or legal set-off: This type exists where both sides in a set of legal proceedings have liquidated debts or money demands (liquidated: claims that may be quantified or ascertained with certainty in the form of a monetary sum);
2. A diminution in value: Where an action is brought for an agreed price of a particular asset or chattel or work which was to be performed according to a contract – the defendant claims a reduction in the value of the asset or chattel by a failure to comply with a warranty or work performed in accordance with the contract has diminished in value.
3. Equitable set-off: These are claims considered by a Court of Equity that regard the cross-claims of the defendant protect the defendant to some extent against the claimant’s claims. These is particularly the case where the cross-claim relates to the particular subject matter of the claim.

Usage: The defendant claimed a set-off against the claimant.

Related Words: contract; claim form; claimant; defendant; locus standi.