Debt Offset

The debt set-off is neither as conspicuous as discharge of debt nor as outstanding as subrogation right and revocation right in debt law, but it is frequently used in our life.Contract Law and the new Bankrupt Law have just very simple regulations on the set-off of debt; General Principles of the Civil Law has nothing about it and there is little systematic discussion on it in academic circle. All these cause the difficulty in the application of law. The simple law leave much blank in legislation, but the academic doesn't give relative response. So, when a judge decides a case, he will be trapped in the situation without support of law or academic reference. Therefore, the author tries to do systematic arrangement on the system of debt set-off in order to put forward some tentative suggestions for the perfection of the system of debt set-off of our country. This is the main purpose of this essay. Moreover, the criticism and correction of my teachers will definitely promote the depth of comprehension of the author about debt set-off. This also a direct motivation which urges the author chooses this topic.This essay contains six parts:The first part is an investigation on the history of debt set-off. This part studies the history of debt set-off from two angles: the society history and the legal history of debt set-off.The second part studies the properties and functions of debt set-off. Based on the discussion of the current theory of debt set-off, the author raises three properties of it: it is substantially legal act; it is independent legal system which offset claims and debts; it is a way of private remedy. Debt set-off has the functions of convenience, saving, fairness maintenance and guarantee. When talking about the function of guarantee, the author advocates that only legal set-off has this type of function.The third part makes detailed comparative study on the conditions of debt set-off legislatively and analyzes some special situation combined with the opinions of the academic and the judicial practice. Our legislation has quite simple regulations on the conditions of debt set-off. In the judicial practice, the most dispute-causing problem is the conditions of debt set-off, especially the conditions of legal set-off. Therefore, the author introduces this part in details, and mainly talks about the condition of legal set-off and little about consensual set-off. The conditions of legal set-off are divided into positive conditions and negative conditions. Among the positive conditions, the author mainly talks about the following points: first, the set-off right of joint debt set-off, guarantor, and the third party of mortgage or hypothecation; second, the condition of the set-off of debt with condition and conditional time period and the set-off of voidable debt. There are too absolutely opposite opinions on whether the debt which is beyond the limitation of action can be offseted. The author think, if the claim is proper for offset within the limitation of action, the debt can be offseted. However, debt which gets the conditions of offset beyond the limitation of action cannot be offseted; third, the author also talks about the relative opinions on the reasons why the legal set-off demands the same types of payment and on the request of the quality and the quantity of subject matter; Forth, the author has a discussion on whether the preferential period that one party gives the other party will cause the barrier of debt set-off and the request of debt set-off to period of the discharge of debt in bankrupt law. The author divides the negative conditions of debt set-off into debt which is forbidden set-off by law, by the parties and by the property of the debt. This essay mainly discusses debt which is forbidden set-off by law. Through comparing Chinese legislation with foreign legislation, the author thinks that seven debts should be forbidden set-off: the new debt between the debtor and the sub-debtor or the debt is due after subrogation right wins the lawsuit; debt caused by tort; debt which is forbidden by law; debt which debtor is given by court order ;debt which benefits the third party; debt which trust is given back and debt on the public law. Among them, although the prohibition of set-off of the first one is not set down both in the foreign law and our law, it is forbidden set-off according to the regulations about subrogation right in contract law.The forth part discusses the way of debt set-off. Through the comparison of the legislation example of too ways of legal set-off which are separately in accordance with German declaration of will theory and French certain offset theory, and according to the regulations of our contract law, the author think the debt set-off should be preceded in the way of declaration of will. Consensual set-off should be done the way the party makes contract.The fifth part talks about the validity of debt set-off. The validity of d(?)bt set-off contains that the debt between the two parties disappears when the debt is properly discharged; the debt set-off can cause the interruption of the time validity; the retroactivity of debt set-off and the discharge of debt by mortgage. This essay mainly discusses the retroactivity of debt set-off. And the author hold the idea that the debtor which late reach the term of payment would better offset the debt and the validity of debt set-off would happen at the time of debt set-off. And when the payback time comes, whether the debtor which reach the term of payment or the debtor which late reach the term of payment should better offset the debt and the validity of debt set-off would happen when the later one's payback time come.The sixth part based on the previous paper, points out the weak point of the debt set-off system and put forward some suggestions on how to perfect it. That is: formally, we should increase the quantity of relative regulations; besides, we should make more details of the regulations. The regulations which need be detailed contain the regulations of some special situations in legal set-off, for example, the set-off of joint debt, the debt set-off which is out of the lawsuit date, and so on. We should also detail the debt which is forbidden set-off by law, like intentional or big mistake-caused tort debt.Although the debt set-off system is a well-known law system, the systematic discussion on this is not usually seen. So, the author tries to deep the comprehension about debt set-off through the study on this system. For the sake of the limited capacity of the author, there might be many defects in this essay. But the criticism and correction of my teachers will make up with it and promote the perfection of the debt set-off system of our country.