CONDITIONS FOR THE APPLICATION OF SET-OFF IN OBLIGATIONS

Abstract

Offsetting of reciprocal homogeneous claims as a means of extinguishing mutual obligations between two parties, each of which simultaneously acts as a debtor and a creditor, is quite commonly used in business practice. The analysis of the current legislation allows us to assert that Article 601 of the Civil Code of Ukraine, which regulates the offsetting of reciprocal homogeneous claims, not fully regulates these relationships and does not allow for the establishment of an optimal construction for this method of termination of obligations. The article analyzes the judicial practice of resolving cases in this category, because through the process of legal application existing gaps in the legal regulation of the corresponding relationships are filled. This analysis has led to the conclusion that courts, through their interpretation, have effectively introduced an additional condition for the application of the offsetting of reciprocal homogeneous claims - indisputability. It is argued that only claims for which there is no dispute regarding the content, conditions of performance, and amount of obligations, or no objections from the other party to the claim for offsetting, should be considered indisputable. The court has an objective opportunity during the dispute to determine the monetary value of the claims of each party based on relevant primary documents. The concept of homogeneity of claims is also broadly interpreted in judicial practice as a combination of the homogeneity of the subject matter of obligations and the homogeneity of the grounds for the emergence of relationships. These theoretical considerations lead to a mistaken practice by courts to refuse the offsetting of claims arising from primary obligations and to consider claims for the recovery of penalties, damages for non-performance or improper performance of obligations under the contract as heterogeneous. However, the latter represent measures of liability for breach of obligations and the payment of indebtedness for the same contract for goods delivered, work performed, or services provided. The author has taken into account and studied the judicial practice in cases of this category and draws conclusions regarding the possibility of applying the offsetting of reciprocal homogeneous claims to various property legal relationships.