Right Of Set-Off Definition

A right of set-off is a contractual right that allows a party to deduct money that is owed to it by the other party from any money that the other party owes to it. In other words, a right of set-off allows a party to offset its debts against each other.

A right of set-off is typically found in commercial contracts, such as loan agreements, between two businesses. It is used as a way to mitigate risk and protect both parties from defaulting on their obligations. Under a right of set-off, if one party defaults on its obligations under the contract, the other party can deduct the amount that is owed from any money that it is owed by the defaulting party. This reduces the risk of loss for the non-defaulting party and provides some financial security in the event of default.

A right of set-off can also be used as a tool to resolve disputes between parties. If two parties have a dispute over money that is owed, they can agree to offset the amount in dispute against any other money that is owed by either party. This can help to resolve the dispute without going to court or incurring additional legal fees.

In summary, a right of set-off is a contractual right that allows one party to offset its debts against another party’s debts. It is typically used in commercial contracts as a way to reduce risk and protect both parties from default. A right of set-off can also be used as