Explanation of Article 295
This article addresses the statement of "set-off," which is: the extinguishment of two reciprocal obligations to the extent of the lesser amount. The article stipulates that set-off occurs in two cases:
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First: "Legal Set-off," which is the set-off that occurs by the force of the system, without the need for an agreement between the contracting parties, provided that the debts are "reciprocal," "of the same kind," "due," and "free from dispute." For example, if a person owes another a certain amount, and the other party owes him another amount, in this case, legal set-off occurs between the two debts, and each is extinguished to the extent of the lesser amount.
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Second: "Contractual Set-off," which is the set-off that occurs by agreement of the contracting parties, and it may occur in cases other than those in which legal set-off occurs. For example, if the debts are not of the same kind, or not due, or not free from dispute, in this case, contractual set-off may occur between them.
It should be noted that set-off leads to the "extinguishment of the obligation," so no legal effect is imposed on the debts after the set-off.
This article is considered one of the most important articles related to set-off, as it clarifies how the obligation is extinguished and enumerates its methods.
Related To
Article 295
A right shall not be extinguished due to the statute of limitations, but any claim for such right made against a party denying it shall not be heard upon the lapse of 10 years, except for cases provided for by a legal provision or the exceptions provided for in this Sub-section.