Also known as: set off rights · setoff rights · set-off right · rights of set-off · setoff · right of set-off · offset rights
Written by attorneys · grounded in primary & secondary sources — see below
A deduction from the amount a plaintiff recovers of any mutual debt the defendant is entitled to assert against the plaintiff.
Simon Stern sued Sterling Manufacturing in federal court seeking over $100,000 in damages for breach of a supply contract. After trial the jury awarded Stern only $42,000. Because the recovery fell below the jurisdictional amount when computed without regard to any setoff, the district court denied costs to Stern and imposed costs on him.
ICX owed CDI on promissory notes but claimed damages after the debtor rejected a distribution agreement. The bankruptcy court permitted ICX to set off the debt it owed against the damages it suffered from the rejection, treating the obligations as mutual under the Bankruptcy Code.
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The statute directs courts to compute the recovery without regard to any setoff or counterclaim to which the defendant may be entitled. When a plaintiff recovers less than $75,000 after that computation, the court may deny costs and impose costs on the plaintiff.
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A partnership may offset amounts a partner or dissociated partner owes against a distribution to which that partner or transferee is entitled. The obligation to pay the distribution remains subject to the offset even after assignment of the economic interest.
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A collecting bank that gives provisional credit acquires a statutory security interest under Article 4 that Article 9 expressly brings within its scope. The interest secures the customer's reimbursement obligation and coexists with the bank's setoff rights.
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