A set-off right is a contractual right allowing the buyer to deduct amounts owing to them under warranty or indemnity claims from amounts otherwise payable to the seller, such as deferred consideration, earnout payments, or rollover equity distributions. Set-off rights are buyer-favourable because they avoid the need to pursue the seller through litigation or to draw on escrow.
Sellers typically negotiate to limit set-off rights to claims that have been agreed in writing or determined by a final court judgment, rather than allowing the buyer to set off against any claim simply asserted in good faith.