[Direct answer]In the Beijing area, there are two types of set-off: statutory set-off — where the parties owe debts to each other and the subject matters and qualities of the debts are the same (both money or the same kind of goods), either party may set off their debts against the other's due debts. The set-off takes effect once the notice reaches the other party, without the need for the other party's consent, except for those debts that cannot be set off by nature (such as alimony, pensions, and debts related to personal exclusivity); and agreed set-off — where the subject matters and qualities of the debts are different (such as a house against a loan), and the parties may also set off their debts upon mutual agreement. Note that statutory set-off requires that "both parties' debts have matured" — debts that have not matured cannot be set off unilaterally. After the set-off notice takes effect, the debts of both parties are extinguished in an equivalent amount, which is the most economical way to clear debts.

1. Problem background and typical scenarios

Company A owes Company B 1 million in unpaid goods, and Company B in turn owes Company A 800,000 in breach of contract penalties—the two companies have been arguing back and forth for half a year, but neither has mentioned "direct offsetting." Set-off is one of the oldest methods of settling debts, but there are many disputes in practice: What if the other party doesn't recognize my claim? Does sending a notice and the other party ignoring it count as successful set-off? If I set off the debt before the other party's claim is disputed, could I be sued in return?

II. Key points of dispute

First, review the constitutive elements of statutory set-off, including the determination of whether the types and qualities of the debts are the same; second, the effective time and form of the set-off notice; third, the exclusionary circumstances of the right of set-off, and the nature of the debts that cannot be set off by agreement; fourth, the consequences of exercising set-off when there are disputes over the creditor's rights.

III. Professional analysis by Henglue Law Firm

The first layer concerns the key elements: both active and passive claims must be valid and have matured—even if the claim against the other party has not yet matured, statutory set-off cannot be invoked; in practice, mutual set-off of monetary debts is the most common; debts that cannot be set off by nature (e.g., labor compensation and personal injury compensation), those agreed upon by the parties not to be set off, and debts prohibited by law from enforcement are all excluded. The second layer focuses on the exercise method: statutory set-off is a formative right that takes effect upon unilateral notification, with no specific form requirement, though written records are ideal. The set-off's effects retroactively apply to the time the notification arrives, extinguishing the parties' debts within the equal amount. If the other party objects, they may sue over the set-off dispute, but the objection does not suspend the set-off's effects unless the court determines the set-off conditions are not met. The third layer emphasizes risk control: if the claimant's claim itself is disputed (e.g., the other party raises quality defect defenses), hasty set-off may be deemed invalid and constitute a breach of contract—a safer approach is to first confirm the claim's validity (through account reconciliation or settlement documents) before issuing a notification, or directly sue to confirm the set-off's validity. When monetary debts coexist with compensation for cargo damage, clear the net amount first before asserting claims. The fourth layer highlights the tactical value of set-off: in enforcement proceedings, parties with matured monetary debts owed to each other can use set-off to avoid double payments; in bankruptcy proceedings, set-off rights are subject to special rules (e.g., no set-off of debts acquired after bankruptcy filing), so cross-border operations must be consulted in advance. Set-off is a legal channel for "account-to-account" settlement—the clearer the notification and the more complete the evidence, the narrower the opposing party's objection space.

IV. Practical Suggestions and Legal Basis

The first step is to check the types, quality, and maturity status of the debts of both parties and prepare a reconciliation list; the second step is to exclude cases where offsetting is prohibited by law or contract; the third step is to claim offsetting in writing and specify the basis for the claim and the calculation of the amount; the fourth step is to initiate a lawsuit for confirmation if the other party raises objections or there are disputes over the creditor's rights. The main legal basis: Article 568 of the Civil Code of the People's Republic of China (effective as of January 1, 2021) on statutory offsetting, and Article 569 on contractual offsetting; the specific application shall be subject to the currently effective provisions.

5. Henglu Law Firm's Reminder

Offset the three checks: check whether the types are the same, check whether the debts are due, and check whether the nature allows it—if all three checks pass, a single notice can clear two accounts. For disputes involving debt offset and account reconciliation, they can be resolved throughCreditor's rights and debts, and enforcementObtain a comprehensive solution for the service; if there are disputes over contract settlement, you can resolve them in combination with other methods.Business and contract disputes in enterprisesPlate; for cases involving bankruptcy set-off, you can refer to it for reference.Special servicesColumn; for matters involving other debt disposal, you can seek adviceSpecial servicesThe team corresponds to the production line.

VI. Frequently Asked Questions

Q1: Can the offset still be applied even if the other party disagrees?

Legal set-off does not require the other party's consent, and it takes effect as soon as the notice arrives. If the other party has objections, the matter shall be resolved through litigation, and the court will review whether the conditions for set-off are satisfied.

Q2: Can the house be used as collateral for the loan?

Items of different types and quality cannot be legally offset, but the parties may agree to offset them by mutual consent. It is best to specify the pricing and ownership transfer arrangements in a written agreement.

Q3: My debt hasn't matured yet. Can I offset it first?

It is not possible to set off debts unilaterally. Statutory set-off requires that both parties' debts have matured. However, it is possible to agree on set-off through negotiation, or to wait until the other party's debt matures before notifying them of the set-off.

Q4: What should I do if the other party ignores the notice of set-off after I send it to them?

Ignoring it will not affect the effectiveness of the set-off; if the other party raises a defense in the litigation, they can simply respond with the notification certificate and the basis of the claim, and the focus of the dispute will then shift back to whether the claim is valid.

Q5: Can the company use the salary to offset the loan amount?

The salary belongs to the category of debts that are not suitable for offsetting in nature, and deductions are subject to labor regulations. If the company unilaterally deducts the salary, it may constitute withholding wages, and the employee can apply for labor arbitration.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify regional differences.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence materials, to avoid missing the statutory time limits.Legal services for creditor-debtor disputes·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.