The recent NSW Supreme Court decision of Smith v Acquire
Asia Pacific Philippines (Case) examined set
off rights in a contractual context. A set off right creates a
defence, reducing a claim to the extent of the available set off.
Set off rights can be complex, particularly in equity. We will
highlight a few of the basic set off principles.
The NSW Civil Procedure Act 2005 (Act)
in section 21 creates a statutory right of set off for mutual debts
("debts" are defined as liquidated claims) but not
unliquidated claims. A claim for a breach of warranty is an
unliquidated claim. This right can be excluded by contract: see
subsection (3). Parties can also create set off rights in their
contract. The Sale of Goods Act (NSW) allows a buyer to
set off a breach of warranty claim against the price: section
54.
