Glossary
Set-off
set-offSet-off is the right to knock one money claim against another so only the net sum is paid. It can be contractual, equitable or statutory. Insolvency set-off is mandatory in a winding-up. Freelance papers often ban the client from setting off unproven claims against an invoice. Say whether set-off is allowed and against which sums.More in the glossary is the right to knock one money claim against another so only the net sum is paid. It can be contractual, equitable or statutory. Insolvency set-off is mandatory in a winding-up. Freelance papers often ban the client from setting off unproven claims against an invoice. Say whether set-off is allowed and against which sums.
Last updated 28 October 2026
The client version is “we will not pay this invoice because the last job was late.” That is a set-off (or a counterclaim) dressed as a delay. The supplier version is a clause that says fees are paid without deduction, and that any claim is pursued separately. Equitable set-off can still apply where the claims are closely connected, even if the paper is silent.
We put a no-set-off line next to payment terms so the invoice stays whole. Lex will not invent a right to deduct “until we are happy.” If the client has a real claim, they raise it; they do not quietly shrink the transfer. Statutory late feeA late fee is an extra charge, or interest, added when an invoice is not paid by the due date.More in the glossary still runs on the unpaid net.
Can a client set off an unproven claim?
Not if the contract bans it and the claim is not a close equitable set-off. A vague “the work isn’t quite right” is not a liquidated cross-claim. A contractual no-set-off clause is routinely upheld in commercial deals. Consumer contracts are a different fairness analysis under the Consumer Rights Act 2015.
Is set-off the same as a counterclaim?
No. Set-off reduces what is payable on this invoice. A counterclaim is a separate claim that may be tried with it. The practical effect can look the same in a negotiation. In a winding-up, Insolvency (England and Wales) Rules 2016 r.14.25 takes over and nets mutual dealings; your no-set-off clause will not beat that.
Should freelancers ban set-off?
Usually, yes — against unliquidated claims. Allow set-off of a credit note you have issued, or of a sum a court or adjudicator has awarded. That keeps the invoice clean without pretending a later judgment cannot be netted.
How does set-off sit with a liability cap?
A client who sets off is using their claim as currency. If that claim would have been inside the liability cap, do not let set-off become a way around the cap. Some drafts say any set-off is treated as a recovery under the cap.
A worked example
A studio invoices £6,000 Net 14. The client pays £4,200 and writes “£1,800 held against the late homepage.” The contract says fees are paid without set-off or deduction, and that claims are raised separately. The studio chases the £1,800 as an unpaid invoice, with statutory interest, and deals with the lateness claim on its own paper. They do not accept the unilateral discount.
How it shows up in a contract
Sample wording · our own drafting
The Client will pay the Fees without set-off, counterclaim, deduction or withholding, except for a credit note issued by the Supplier or a sum required by law. This clause does not apply to mandatory insolvency set-off. Any other claim by the Client will be pursued separately and is subject to the liability cap.
In Plain English
Pay the invoice in full. Do not knock your own claim off it, unless we have issued a credit or the law requires a deduction. If you have a claim, raise it as a claim. Insolvency set-off is the exception the statute makes.
Common mistakes
- Letting a client “hold back 20% until we’re happy” when the paper bans set-off.
- Writing a no-set-off clause that pretends to beat mandatory insolvency set-off.
- Forgetting that equitable set-off can still apply to a closely connected claim if you leave the clause silent.
- Using set-off to dodge the liability cap.
Frequently asked questions
What is set-off in a contract?
The right to knock one money claim against another so only the net sum is paid. It can be contractual, equitable, statutory or (in a winding-up) mandatory.
Can a client set off an unproven claim against an invoice?
Not if the contract bans it and the claim is not a close equitable set-off. A vague quality complaint is not a liquidated cross-claim.
Is set-off the same as a counterclaim?
No. Set-off reduces this invoice. A counterclaim is a separate claim. Insolvency set-off nets mutual dealings and cannot be contracted out of.
Should freelancers ban set-off?
Usually, against unliquidated claims. Allow credit notes you have issued and sums a court has awarded. See /glossary/payment-terms.
Related
The legal wording governsLast reviewed 28 October 2026Pending lawyer review