Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Cash flow definition

What does Cash flow mean? Cash flow describes the net movement of cash and cash equivalents into and out of a business during a period. For lawyers, it is central to assessing liquidity, debt service capacity, covenant compliance, going concern, and insolvency risk. It is a descriptive expression rather than a statutory legal term, though accounting standards (IFRS IAS 7; UK/Irish GAAP FRS 102, with small/micro exemptions) prescribe how cash flows are presented. The primary source is the cash flow statement in the annual report and accounts, showing operating, investing and financing cash flows, and whether cash was generated or consumed and how. Unlike profit...

Set-off and Abatement in Construction Contracts: HGCRA Payment/Pay Less Notices, Cross-Contract Set-off, Limitations, and Drafting/Exclusion Guidance

Published by a LexisNexis Construction expert

Practice notes

Reliable Cash flow underpins the construction sector—without it, schemes would swiftly stall and delivery would suffer. Where both sides owe Money to one another (for instance, an Employer must pay the contractor for completed works, yet the contractor owes the employer for damage caused during those works), it is commercially sensible to use a device that results in a single net payment rather than two separate transfers between the parties involved. That device is ‘set-off’. This Practice Note outlines set-off (in general terms and within the construction sphere), describes how it operates day to day and provides practical pointers and issues to consider when handling set-off under construction contracts.

What is set-off?

From a commercial perspective, set-off is a tool parties use to regulate cash flow across their dealings. It permits opposing monetary claims to be netted off so that only one balance is payable ultimately by one party to the other on a net basis. In litigation, set-off serves as a defence to a demand for sums said to be due at law. For further detail, see Practice Note: What is set-off and when is it available? An illustration in the construction context is an employer recouping the cost...

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Web page updated on 21/05/2026

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