A set-off clause lets the other party subtract money they claim you owe them from payments they owe you. For example, if they owe you £10,000 but claim you damaged their equipment for £2,000, they might pay you only £8,000 and call it even. This is medium-risk because it can delay or reduce your payment without your agreement. Legally, set-off rights exist in common law (both UK and US), but this clause often expands them unfairly—allowing the other party to set off amounts they merely *claim* you owe, not amounts a court has confirmed.
Limit set-off rights to amounts that have been agreed in writing or confirmed by a court—not to disputed claims. Insist that they must notify you in writing before deducting anything, giving you 10 days to respond, so you're not surprised by a reduced payment.
Frequently Asked Questions
What does this clause mean in simple terms?
A set-off clause lets the other party subtract money they claim you owe them from payments they owe you.
Why should I care about this clause?
For example, if they owe you £10,000 but claim you damaged their equipment for £2,000, they might pay you only £8,000 and call it even.
What are my options?
This is medium-risk because it can delay or reduce your payment without your agreement.
How does this affect small businesses?
Legally, set-off rights exist in common law (both UK and US), but this clause often expands them unfairly—allowing the other party to set off amounts they merely *claim* you owe, not amounts a court has confirmed.