Exclusion of set-off rights

KAUPTHING v MILL [2009]

The High Court confirmed that parties can exclude all rights of set-off. ‘Set-off’ arises where a debtor has a form of counterclaim against a creditor, which is used to reduce or extinguish the creditor's claim.

facts:

decision:

The Judge held that the rights of set-off (both legal and equitable) could be excluded by agreement. The wording and the commercial context demonstrated that all types of set-off or counterclaim were excluded.

points to note:

Quite apart from re-affirming the fact that all forms of set-off may be excluded by contract, which is of itself very important, the judgment draws attention to the principal differences between rights of set-off in law and in equity:

PETROPLUS v SHELL [2009]

This is another case regarding set-off showing that wording in a payment clause which prohibits any set-off may oblige a buyer to pay an invoice in full notwithstanding that the buyer may have a valid claim against the seller arising from the seller's performance of the same contract.

facts:

decision:

The Court said the no set-off provision was effective to prevent S from making any unilateral deduction. S was not precluded from bringing a counterclaim in an action for damages for breach of contract, but the Judge decided that the express payment mechanism should be given effect.

points to note:

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