Set-off of receivables - how to do it effectively?


Set-off of receivables is an institution regulated by civil law, consisting in mutual cancellation of debt up to the amount of the receivable lower with retroactive effect from the moment the receivable became due. Its parties are the creditor and the debtor, who set off each other's claims under an agreement concluded between them. Set-off may be a unilateral action (it then serves as payment, enforcement and security and does not require the consent of the person to whom it is addressed) or bilateral, in which the parties, under the principle of freedom of contract, may freely shape the concluded contract. As can be seen, for such a situation to occur, it is necessary for both parties to be both creditors and debtors. The subject of such an agreement may only be money or things of the same quality, marked with regard to species.

Effective offsetting of receivables

In order for the set-off to be effective, the conditions listed in Art. 498 of the Civil Code, so:

1) the parties must be both creditors and debtors to each other,

2) the subject of the deduction must be money or things of the same quality, marked as to the species,

3) both claims must be due and may be pursued before the court - it means that the deadline for their fulfillment has already expired, therefore both creditor may demand from each other the performance of the benefits due to them. An attempt to set off an unmatured claim is ineffective and requires the submission of a separate declaration at a later date, after the claim is due.

The above-mentioned conditions for the set-off must be met cumulatively (jointly).

It is important that in order for the set-off to be effective, it is necessary to submit a declaration of will in this matter. This means that despite the fulfillment of the above statutory conditions for set-off, there will be no mutual redemption of receivables without a prior declaration of will, because such a declaration is constitutive and it is unacceptable to make a set-off by operation of law. As a rule, the form of the declaration is arbitrary, however, for evidential purposes, it is most sensible to make it in writing. For the declaration to be binding, the other party must be able to read it. In this regard, the rules of service included in the provisions of civil law apply. According to them, it is assumed that the declaration of will was submitted at the time of delivery to the addressee its content, it is less important, or even completely irrelevant, whether and when he or she got acquainted with it. It is sufficient that the declaration of will came to him in a way that gives him a real opportunity to read the content.

Which claims are non-deductible?

It should also be remembered that not every claim can be set off. The catalog of non-returnable claims is provided for in Art. 505 of the Civil Code, according to which the receivables are not redeemed:

1) not amenable to seizure,

2) for the provision of means of subsistence, e.g. alimony,

3) resulting from unlawful acts, e.g. compensation, redress,

4) for which the set-off of claims is excluded by special provisions.

The above-mentioned exclusions are provided for only in the case of statutory set-off, because, as mentioned above, the contractual set-off may be freely shaped, and thus, even non-due, non-appealable, heterogeneous claims can be set off.

To sum up, set-off of receivables enables easier, faster and, in principle, not associated with additional costs, cancellation of higher receivables, and sometimes of both receivables (when they are of equal amount). The set-off made under the contract may be freely determined by the parties, while the statutory set-off, after meeting the conditions set out in the Civil Code, may be made unilaterally, therefore it does not require the consent of the other party. Both the contractual and statutory set-off are undoubtedly an important instrument for persons who are both creditors and debtors to each other, allowing for the settlement of obligations not only through their actual fulfillment, but also through their mutual cancellation, fully or partially.