In this short paper, I would like to explain why the rules on set-off in the reformed French Civil Code (published 11 February 2016), are in many respects a missed opportunity to modernise the French law on that topic, even if some interesting innovations have taken place.
The role and definition of set-off
Whereas the old Code civil did classify set-off as a mode of extinction of obligations by its position in Chapter V (of Title III) entitled “De l'extinction des obligations”, the new provisions start with an article containing a definition of set-off as the simultaneous extinction of reciprocal obligations between two parties (new Article 1347 CC).
First of all, it is unfortunate to add another definition instead of directly formulating the rule as the old Article 1289 CC did. Codes should contain as few definitions as possible; the task of codes is not to define things that are by their nature only instances of rules and not a description of facts; their task is to contain good, operative rules. Definitions only make sense in order to avoid having to repeat certain things over and over again in rules.
Secondly, the definition is, as nearly all definitions in French codes, incomplete. It does not include the different elements and it does not spell-out the different roles of setoff. Modern doctrine stresses that set-off is not merely a mode of payment, i.e. extinction of obligations, but also a mode of getting paid, i.e. of enforcement of a right to payment and in anticipation thereof a security for the creditor. The security function of set-off is completely missing. If we turn e.g. to the EU Insolvency Regulation, that role is precisely stressed, esp. in consideration (70): “If a set-off of claims is not permitted under the law of the State of the opening of proceedings, a creditor should nevertheless be entitled to the setoff if it is possible under the law applicable to the claim of the insolvent debtor. In this way, set-off would acquire a kind of guarantee function based on legal provisions on which the creditor concerned can rely at the time when the claim arises”.