Set-Off in South African Law : challenges and opportunities

[摘要] ENGLISH ABSTRACT : This study focuses on the principles surrounding the operation of set-off in South African law. It is evident that no uniform answer exists to the question of how set-off operates: it either operates automatically as soon as its requirements are met or in terms of a declaration by one of the parties, but with retrospective effect. This thesis examines the uncertainty and problems surrounding these two opposing approaches to the operation of set-off, and further considers the impact of sections 90 and 124 of the National Credit Act 34 of 2005 (NCA) on set-off.In order to evaluate the two approaches to set-off, their historical origin, practical effect and the policy considerations informing them are analysed. This analysis is also informed by comparative perspectives on the operation of set-off adopted in civilian jurisdictions. The thesis further examines the circumstances in which a party will be precluded from relying on set-off. It focuses on an agreement between the parties to exclude set-off, waiver of a party's right to set-off and the circumstances in which a party can be estopped from invoking set-off.It is shown that neither of the approaches to set-off adopted in South African law provides an adequate explanation for the way in which set-off is applied in practice. The thesis illustrates that this can be attributed to the fact that the automatic approach affords insufficient recognition to the autonomy of contracting parties and that the retrospective approach leads to practical difficulties. The uncertainties which exist regarding the exclusions of the right to invoke set-off are also highlighted, as well as the difficulty in reconciling these exclusions with the automatic approach to set-off.The examination of sections 90 and 124 of the NCA focuses on the interpretation of these sections, and considers whether and to what extent, a limitation on a credit provider's right to invoke set-off is desirable. It is concluded that these sections are unclear and that, although certain limitations of a credit provider's right to invoke set-off are justified, the conditions set by the NCA are too stringent. Legislative reforms are suggested to clarify and improve the protection granted by the NCA.Finally, it is argued that South African courts should take note of international developments regarding the operation of set-off and opt for a solution which is more in line with modern commercial reality. Such a solution can be found in the UNIDROIT Principles of International Commercial Contracts and the Principles of European Contract Law, which recommend that set-off should be effected by a notice with prospective effect. It is shown that this approach ensures legal certainty and offers a solution which aligns legal and practical reality.

[发布机构] Stellenbosch University