12.3.1 During the Service Period, any amount to be set-off should generally be applied against the next payment of the Unitary Charge (or other payments) due after the amount owed by the Contractor has fallen due and payable (unless the Contractor has already paid the Authority the relevant amount).
Suitable drafting is as follows:
12 Set-off
(a) The Contractor shall not be entitled to retain or set off any amount due to the Authority by it, but the Authority may retain or set off any amount owed to it by the Contractor under this Contract which has fallen due and payable174 against any amount due to the Contractor under this Contract.175
(b) If the payment or deduction of any amount referred to in paragraph (a) above is disputed176 then any undisputed element of that amount shall be paid and the disputed element shall be dealt with in accordance with Clause 28 (Dispute Resolution).
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174 This must be by definition an ascertained amount.
175 The right to set off here is subject to the restriction in Clause 22.4 (Set-off on Termination).
176 This would apply, for example, to performance or availability deductions.