Legal, contractual and unilateral compensation

Compensation

Compensation is a method of the termination of debts and claims without fulfillment. On the basis of compensation in relation to one person shall be terminated debts and claims which exist towards another person without fulfillment.

Compensation may be legal, contractual and unilateral.

Legal compensation is compensation which is conducted on the basis of the law, regardless of the willingness of participants in compensation. Currently legal compensation does not stipulated by the positive legislation of Republic Serbia. Contractual compensation is compensation which arising under the contract, while the unilateral form is arised on the basis of a unilateral statement of intention

Contractual compensation

Contractual compensation is not regulated by law explicitly, but it is allowed on the basis of freedom of contracting (autonomy of intention).

An essential requirement is only that there is a mutuality of claims, ie. that two persons, one in relation to another, there are in the role of the creditor and the debtor. If such persons have agreed to terminate the obligations (claims), instead of fulfilling of the duties which they have, then it is possible to conclude contracts that provide for termination of mutual debts and claims without fulfillment.

Contractual compensation is permitted as multilateral.

Unilateral compensation

Also compensation can be made as a unilateral compensation, and it is foreseen and regulated by the Law on Obligations (Articles 336.-343.).  It arises on the basis of a statement of intention of one party in a legal relationship, but only if the conditions provided by the law are fulfilled.

General Conditions

A debtor may offset the claim by a creditor against him with his claim against the creditor, should both claims be of a monetary nature, or be other exchangeable objects of the same kind and quality, should both claims be due.

Statement of Offestting

There shall be no offsetting as soon as conditions for it are materialized; instead, one party must declare to the other his intention to claim offsetting.

When the offset is claimed, offsetting shall be considered to have taken place at the moment of materialisation of the relevant conditions.

Lack of Reciprocity

A debtor shall not compensate what is owed to the creditor against what is owed by the creditor to his guarantor. However, the guarantor may compensate the debtor’s obligation to the creditor against the debtor’s claim against the creditor.

If a party has given his own object as a pledge securing another person’s obligation, he may request from the creditor the restitution of the object pledged when conditions for the termination of such obligation by compensation materialize, or if the creditor has missed the compensation through his own fault.

An Expired Claim

A debt may be compensated against an expired claim only if such claim has not expired at the moment when conditions for the compensation materialized.

Should conditions for compensation materialize after one of the claims has expired, the compensation shall not take place if the debtor of the expired claim has raised the objection of expiration due to statute of limitations

Compensation Against Assigned Claim

A debtor of an assigned claim may claim compensation regarding the recipient against those of his claims which, until the notification of assignment, he could have compensated regarding the assignor. He may also compensate with him those of his claims against the assignor which he had acquired prior to notification of assignment whose fulfilment was not due at the moment of his being notified of the assignment, but only should the corresponding time limit fall before the time limit for fulfilment of the assigned claim, or co-incide with it.

A debtor expressing his firm intention to the recipient to accept the assignment shall not be able to compensate any of his claims with him against the assignor.

Should the assigned claim be entered in the books of title, the debtor may effect the compensation regarding the recipient only should his claim be entered together with the assigned claim, or should the recipient be notified accordingly about such claim at the time of the assignment.

Ban on Compensation

There shall be no termination by way of compensation of:

  • a claim impossible to seize
  • a claim relating to an object or to a value of the object delivered to the debtor for custody or for loan, or taken unlawfully by the debtor, or kept unlawfully by him
  • a claim occuring through wilful misconduct
  • a claim for damages for damage to health or causing death
  • a claim arising from statutory duty or alimony.

Ban on Other Party’s Claim

A debtor shall effect no compensation should his claim become due only after a third person has imposed a ban on the creditor’s claim against him.

Taking into Account by Way of Compensation

Should several obligations exist between two persons which may be terminated by way of compensation, the compensation shall be effected under the rules otherwise applicable for taking into account in the matter of fulfilment.

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