The law relating to set-offs and counterclaims has been considered on a number of occasions in the last decade, and developments reviewed in this Quarterly.1 The basic attitude of the common law is that, where a defendant’s obligation to pay money has fallen due, he is not entitled to deduct from the sum payable an amount in respect of a related claim against the plaintiff: proper performance of the disputed obligation is not a condition precedent to the plaintiff’s recovery of the amount owed to him. In three cases alone has the common law permitted abatement of the plaintiff’s claim: in claims for the price of goods sold and delivered with a warranty (see now Sale of Goods Act 1979, s. 53(1)(a)), for goods agreed to be supplied according to a contract and for work and labour done, and for rent due.

The clearest recent expression of the general common law position in the area of commercial law is in recent decisions on the non-availability of deductions from freight claimed for carriage of goods by sea. Provided freight has been earned by delivery to destination of cargo conforming with its proper description2 the defendant cannot deduct from the freight payable any amount allegedly due to him from the carrier as damages for: damage to cargo;3 loss of part of the cargo shipped;4 in the case of lump sum freight, failure to load and carry a full cargo;5 or delay in failing to prosecute the voyage with reasonable despatch.6 The House of Lords in The Aries 6a found the freight rule to be long-established and certain, not affected by any possibility of equitable setoff, and alterable by contrary intention—therefore, in no need of change.

So far as “time-chartered freight” or “time freight” (i.e. time-charter hire) is concerned, the commonly used off-hire clause is a well-known example of contracting parties’ habitual use of express terms to provide for deductions in time charter-parties. The common law position did not, therefore, become a matter for debate until the 1970s, when the conflict between a number of first instance decisions was considered by the Court of Appeal in Federal Commerce & Navigation Co. Ltd. v. Molena Alpha Inc. (The Nanfri).7 A majority of the Court of Appeal held that there was an equitable right to set off-from hire a reasonably quantified sum in respect of breaches of contract depriving the charterer of part of the consideration for which the hire was payable, at least where the shipowner wrongly deprived him of the use of the vessel or prejudiced him in his use of it. The House of Lords affirmed the decision of the Court of Appeal on another point. As with Mareva injunctions in Siskina (Owners of cargo lately laden on board) v. Distos C.N.S.A. (The Siskina),8 the House’s reluctance to comment