The Retroactive Effect of Set-Off
The law of set-off provides another example of how our modern legal thinking is, arguably, still unconsciously dominated by Roman law. In continental Europe wre essentially have two different regimes concerning the effect of set-off.[326] The more traditional one prevails in French law.
As soon (and as far) as two obligations capable of being set off against each other confront each other, both of them are extinguished?[327] Set-off, in other words, takes effect ipso iure and it operates retrospectively. This approach is based on a tradition reaching back to Roman law...ut actiones ipso iure minuant' is how Justinian described the effect of set-off in Inst. IV, 6, 30. The other solution is the one implemented in the German Code: set-off has to be asserted by an extrajudicial, informal, and unilateral declaration to the other party.[328] This approach today is widely regarded as preferable since it considerably enhances legal certainty without being unduly formalistic.[329] Somewhat strangely, however, it is generally accepted that the declaration has retroactive effect: the obligations, as far as they are coextensive, are deemed to have been discharged at the moment at which, being suitable for set-off, they first confronted each other.[330] [331] Even though the artificial notion of a retroactive declaration of set-off is not practicable without recognizing a number of exceptions, and is detrimental to legal certainty,5;i it has hardly ever been questioned.[332] Nor have any good policy reasons been advanced in favour of it. Instead, retroactivity seems to be regarded as being somehow intrinsically related to the 'essence' of set-off.[333] [334] In reality, we seem to be dealing here with (indirect) consequences of the ipso hire doctrine still overshadowing our perception of set-off. This suspicion is confirmed if we turn our attention to those European legal systems that have, in this respect, remained unencumbered by the Justinianic heritage: English and Nordic law. They merely attribute ex nunc effect to set-off.
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