Guarantee Agreement Template (Securities Purchase and Notes)
A guarantee agreement is used to secure debt by having a third party guarantee payment of securities or notes.
Right of set off
The right of set-off is a contractual clause allowing one party to offset mutual debts with another party by deducting the owed amount against any obligations the other party has to them. This provision helps reduce the risk of default by enabling both parties to net out their liabilities and receivables.
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10 Right of set off examples
- Description
Set-Off. You may use the right of set-off. This means you may set-off any amount due and payable under the terms of this Note against any right I have to receive money from you.
- Description
Subject to any other written contract, if my right to receive money from you is also owned by someone who has not agreed to pay this Note, your right of set-off will apply to my interest in the obligation and to any other amounts I could withdraw on my sole request or endorsement.
- Description
Your right of set-off does not apply to an account or other obligation where my rights arise only in a representative capacity. It also does not apply to any Individual Retirement Account or other tax-deferred retirement account.
- Description
You will not be liable for the dishonor of any check when the dishonor occurs because you set-off against any of my accounts. I agree to hold you harmless from any such claims arising as a result of your exercise of your right of set-off.
- Description
No Right of set-off – The parties have agreed that any amounts owed shall not be subject to a set-off right.
- Description
Existing rights unaffected The Owner shall not be obliged to exercise any of its rights under Clause 13.1 (Application of credit balances); and those rights shall be without prejudice and in addition to any right of set-off, combination of accounts, charge, lien or other right or remedy to which the Owner is entitled (whether under the general law or any document).
- Description
Amounts due under the New Facility Letter are currently not secured, but subject to the Bank’s right of set-off and right to repayment on demand and call for cash cover.
- Description
Subject to applicable law, including the Trust Indenture Act, no Holder may exercise or claim any right of set-off, counterclaim, combination of accounts, compensation or retention in respect of any amount owed to it by the Company arising under or in connection with the Senior Debt Securities. The Holders of Senior Debt Securities by their acceptance thereof will be deemed to have waived any right of set-off, counterclaim, combination of accounts, compensation and retention with respect to the Senior Debt Securities or this Senior Debt Securities Indenture (or between the obligations under or in respect of any Senior Debt Securities and any liability owed by a Holder to the Company) that they might otherwise have against the Company, whether before or during a winding-up or liquidation of the Company.
- Description
Right of Set-Off. In consideration of Bank’s agreement to enter into this Amendment, Borrower hereby reaffirms and hereby grants to Bank, a lien, security interest and right of set off as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Bank (including a Bank subsidiary) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
- Description
No right of set-off. Unless this deed expressly provides otherwise, a party has no right of set-off against a payment due to another party.
What is the Right of Set Off?
The Right of Set Off refers to the legal ability of a party, typically a financial institution or a lender, to offset mutual debt with a counterparty by subtracting one debt from the other. This ability often arises in financial contexts, where two parties owe each other money, allowing the net difference to be settled, rather than each party paying the full amount individually.
When should I use the Right of Set Off?
You should consider using the Right of Set Off in situations where:
- Both Parties Are Indebted: When two parties owe debts to each other, set off can simplify the repayment process by settling the net balance.
- Risk Management: Financial institutions use set off to mitigate risks associated with outstanding debts.
- Bankruptcy: In bankruptcy or insolvency proceedings, set off may be used to determine net obligations, affecting potential recoveries.
- Contractual Arrangements: Businesses and individuals often use set off to ensure mutual debts are efficiently managed, reducing administrative burdens.
How do I write a Right of Set Off clause?
When drafting a Right of Set Off clause, consider including:
- Scope: Define what obligations can be set off—typically, this includes any undisputed debts.
- Mechanism: Outline the process for identifying and executing the set off, including notice requirements and timing.
- Exceptions/Limitations: Specify any conditions under which set off may not apply, e.g., secured obligations or debts not yet due.
- Jurisdiction: Indicate the applicable legal jurisdiction governing the set off rights.
Example Clause:
“Each party reserves the right to set off any undisputed debt or claim against amounts payable under this agreement. The party intending to set off shall give the other party advance written notice detailing the amounts intended for set off.”
Which contracts typically contain the Right of Set Off?
Contracts that often include Right of Set Off clauses are:
- Loan Agreements: Used to ensure lenders can recover debts by offsetting against any borrower funds held by the lender.
- Service Contracts: Ensures mutual obligations can be efficiently managed between service providers and clients.
- Supply Agreements: Facilitates the offsetting of mutual claims between buyers and suppliers for goods delivered and payments due.
- Intercompany Agreements: Often used within corporations to simplify transactions and balances among subsidiaries or related entities.
In summary, the Right of Set Off is a critical tool for managing mutual debts effectively, minimizing credit risk, and ensuring contractual obligations are fulfilled efficiently.
Templates refrencing "Right of set off"
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More Clauses from the Library
Dive deeper into the world of clauses and learn more about these other clauses that are used in real contracts.
Right to audit
The "Right to Audit" clause grants a party the ability to review and examine the financial records, systems, and practices of another party to ensure compliance with contractual terms and accuracy of financial reporting. This clause is often included to provide transparency and accountability, and to safeguard against fraud or mismanagement.
Right to encumber
The "Right to Encumber" clause allows a party to use property as collateral to secure a debt or obligation, potentially impacting the property's marketability or the rights of other stakeholders. It grants the holder the ability to place liens or mortgages on the asset, often subject to terms and conditions outlined in the agreement.
Right to indemnification
The "Right to Indemnification" clause in a contract ensures that one party (typically the indemnitee) is protected from any losses, damages, or liabilities incurred as a result of the actions or omissions of another party (the indemnitor). This clause obligates the indemnitor to compensate the indemnitee for any costs or legal fees arising from claims, effectively shifting the risk from one party to the other.
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