RIGHT OF SET-OFF UNDER DUTCH CARIBBEAN LAW
One of the most modern regimes in the world
The legal concept of set-off may be defined as setting cross-claims off against each other to produce a single balance. For instance, if A were to have a claim against B for a sum of money, and B would have a cross-claim against A for a sum of money, then B is entitled to be absolved from payment of A’s claim to the extent of his cross-claim and is also entitled to use his cross-claim in pleadings as a defense in an action by A to enforce his claim.
Set-off functions both as a payment and as security. The discharge of obligations by way of set-off does not only facilitate payment transactions, but also provides the debtor who invokes set-off, factual priority over other creditors of the other party. This is of particular importance if the other party is not willing, or unable, to discharge the debt, e.g. in case of bankruptcy.
Although set-off will often involve monetary claims, as in the example above, this is not required by law. According to Section 6:127, subsection 2 of the Civil Code, a debtor is entitled to set-off if he can claim performance of an obligation from the other party, which corresponds to his debt to that other party, and if he has both the right to (i) pay his debt and (ii) enforce payment of his own claim. For instance, if A where to have a claim against B for e.g. (delivery of) “cars with specific qualities or features”, and B would have a claim against A for (delivery of) “Jaguars”, then if it can be said that these claims correspond, i.e. (briefly put) if Jaguars possess the specific qualities or features, they may be set-off assuming the other conditions for a set-off are also met.
On the whole, the statutory scheme for set-off under Dutch Caribbean law is very comprehensive and offers a wide range of possibilities to fulfill the aforementioned functions of payment and security. It ranks, even when considered against such sets of rules as the PECL (Principles of European Contract Law) and the UPICC (UNIDROIT Principles of International Commercial Contracts), among the most modern regimes in the world. It is also very flexible and allows for tailor-made or individual arrangements, by allowing parties to a large exent to contractually extend, limit, or exclude altogether, (statutory) rights of set-off. The latter is, for instance, often done by banks in their general terms and conditions of banking.
Karel Frielink / Ursus van Bemmelen
Dutch Antilles Attorneys / Lawyers
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