Set-off clauses
A practice note that offers guidance on rights of set-off. This Practice Note outlines the non-contractual rights arising under general law, such as legal, equitable, and mandatory insolvency set-off. It explains how parties use clauses in commercial and consumer contracts to extend or restrict these rights. The note explores why parties may exclude set-off, to secure prompt payment, and discusses how courts interpret these restrictive provisions. A key focus is the impact of unfair terms legislation, including the Unfair Contract Terms Act 1977 (UCTA) and the Consumer Rights Act 2015 (CRA), on whether a clause limiting set-off is valid. This Practice Note considers the factors for assessing reasonableness under UCTA and fairness in consumer contracts in relation to set-off, providing insight into drafting clauses that are likely to be enforceable.
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