Set-off is a legal principle that permits a debtor to reduce or
discharge their liability to a creditor by asserting a reciprocal
claim against that creditor, arising from a separate and
independent transaction. It functions to reconcile mutual debts,
allowing only the net balance to be payable, thereby streamlining
the enforcement of obligations between parties with
cross-liabilities. This mechanism enhances transactional efficiency
by eliminating the need for monetary transfers and related costs.
It also serves as a form of security by mitigating exposure to
third-party creditor claims in cases of insolvency. Under Bahraini
Law, set-off may take one of three forms: legal, contractual, or
judicial. This article seeks to examine each form, outlining the
legal conditions and practical scenarios in which each applies.
