Legal Translation of Set-off: compensation légale or réduction arbitraire?

⚠️ A word that looks simple… but is not in law.

The term set-off may seem intuitive: one might think of a deduction, adjustment, or discount. But in legal contexts (contractual, banking, or litigation), it refers to a strictly regulated mechanism: the compensation légale or contractual compensation between two reciprocal debts.

👉 It is not a simple réduction arbitraire. It is a legal mechanism by which one party cancels all or part of its debt by invoking an equivalent claim against the other party.

⚖️ In law: a mechanism of compensation between cross-claims

Set-off arises when two parties are both creditor and debtor to each other. Under certain conditions, the debt can be extinguished by compensation, either automatically or by court decision.

Examples:

• The defendant claimed a set-off for amounts previously overpaid
  → Le défendeur a invoqué une compensation pour des montants payés en trop

• The bank exercised its right of set-off against the client’s account
  → La banque a exercé son droit de compensation sur le compte du client

• Set-off is only available when the debts are mutual and due
  → La compensation n’est possible que si les dettes sont réciproques et exigibles

👉 It is a right, sometimes provided by law, sometimes by a contractual clause.

🧾 Types of set-off

• Legal set-off → compensation légale

• Equitable set-off → compensation recognized by a judge to avoid unfairness

• Contractual set-off → clause de compensation provided in the contract

• Bank set-off → the bank’s right to enforce compensation with client funds

✅ In summary

• Set-off = compensation légale between two reciprocal debts

• ❌ Not a réduction arbitraire or commercial rebate

• Its application depends on the governing law or the contract itself

📌 TransLex’s Advice

Before translating set-off, ask yourself:

• Do the parties have reciprocal, due, and enforceable debts?

• Is the compensation based on the contract, or on statutory law?

• Is the context judicial, banking, or commercial?

👉 In law, set-off = structured compensation, not a réduction arbitraire.
👉 A clause de set-off can have major consequences in case of litigation or insolvency.