Subsection 1: General rules

Compensation is the simultaneous extinction of reciprocal obligations between two persons. It takes place, subject to being invoked, in due proportion, on the date when its conditions are met.

Subject to the provisions of the following sub-section, set-off occurs only between two obligations which are fungible, certain, liquid and due. Obligations for sums of money, even in different currencies, are fungible, provided they are convertible, or those which have as their object a quantity of things of the same kind.

Claims that cannot be seized and obligations to return a deposit, a loan for use or a thing of which the owner has been unjustly deprived are only compensable if the creditor consents.

The grace period does not preclude compensation.

If there are several compensable debts, the rules for charging payments are transposable.

A debtor who has taken unreserved note of the assignment of the claim may not set up against the assignee the set-off that he could have set up against the assignor.

The surety may set off what the creditor owes to the principal debtor. A joint and several debtor may rely on set-off of what the creditor owes to one of his co-obligors to have the latter’s divided share deducted from the total debt.

Compensation is without prejudice to rights acquired by third parties.