Set-Off

Set-off (compensatio) was a form of termination of an obligation which came to the fore when two parties were both debtor and creditor with respect to each other.

For instance, one party could be creditor to another by virtue of a stipulatio for payment of an amount of money while the other party was creditor to the first for payment of a monetary penalty arising from a delict. Instead of compelling the parties to pay each other, it seemed reasonable to allow the discharge of the relevant obligations by an adjustment and settlement of the reciprocal debts. Thus, if the debts were equal they would be discharged entirely; if unequal, the smaller debt would be discharged while the larger would remain in force for the balance. In this way the parties' obligations towards each other could be extinguished entirely or partially.^{^[1025]}

Classical Roman law recognized a diversity of cases in which compensatio could be effected. First, there was the case that arose from a transaction engendering a iudicium bonae fidei with respect to which the judge was given full power to resolve controversial matters according to the principles of good faith. In such cases it was possible for the judge to set-off a counterclaim of the defendant originating from the same transaction (ex eadem causa) against the claim of the plaintiff. For instance, a case involving a contract of letting and hiring could feature a lessor who had a claim because the lessee had fallen in arrears with his rent and, on the other hand, the lessee had a claim for costs incurred by him in the maintenance of the rented property. Instead of instituting two separate court cases, it was possible for both claims to be brought before the same judge for determining each claim and compensating the two parties against each other.^{^[1026]} The next case was that of property deposited with a banker (argentarius).

In this case the principle prevailed that the client's claim for what had been deposited had to be compensated against the banker's claims for payments he made on behalf of the client, and only the balance could be claimed. It was required that the claims of both parties shared the same nature and quality (i.e. for money, as a rule), but they did not have to arise from the same cause of action.^{^[1027]} A third case referred to in the sources arose when a person bought an insolvent estate. The buyer (bonorum emptor) was entitled to bring a claim in favour of the estate only after deduction (cum deductione) of a counterclaim the defendant might have had against the estate. The claims in question might have arisen from the same or separate transactions, and did not necessarily have to display a similar nature.^{^[1028]}

Justinian extended the applicability of compensatio further by providing that all actionable, liquid (liquida) claims and counterclaims could by operation of law (ipso iure) be set-off regardless of whether they were based on real or personal rights.^{^[1029]}

4.13.4

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Source: Mousourakis G.. Fundamentals of Roman Private Law. Springer, 2012.— 366 p.. 2012

Set-Off

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