Lien: Lien is the right of bank to possess goods or a security until an investment due is paid. The owner of the property, who grants the lien, is referred to as the lienor and the person who has the benefit of the lien is referred to as the lienee. There are two types of lien:
1) The general lien which means to retain any property belonging to the other for any lawful payment and
2) It is relating to retain those goods, which are the subject matter of contract of particular lien.
Right of set off: It is the right of the bank in respect to a contractual relation to appropriate and adjust the amount payable between two different accounts of the same party.
It is not unusual for a customer to have a current account, a savings account and a credit card account -
all with the same bank. When an overdraft facility on a current account runs out and the customer fails to pay the amount owed, the firm takes money from the customer’s savings account to reduce or clear the debt.
Or, if a customer fails to make credit card or mortgage payments, bank may use available funds from that customer’s current or savings account to make the missing payments, thereby helping the customer to avoid extra interest or charges.
Bank has a right, but not a duty, to look at a customer’s overall position and to ‘combine’ the acc ounts held by that customer. This is sometimes called a right of ‘set off’ or a right to ‘combine’ accounts. A bank has this as a general right, whether or not it mentions the right in the account terms.