Also known as: recoupment · claim in recoupment · recoupment defense
Written by attorneys — see sources below.
A right available to an account debtor or obligor to reduce or avoid payment obligations by asserting against an assignee or holder any defense or claim that arises directly from the transaction giving rise to the assigned contract or instrument.
Duffy Construction contracted with Duarte Shipping to supply custom panels for a warehouse project. Duarte assigned its right to payment to Diamond Manufacturing. When the panels arrived with structural flaws that required costly repairs, Duffy withheld the balance due. Diamond sued for the full amount. Duffy asserted its repair costs as a claim in recoupment arising from the original supply transaction, reducing the sum owed to Diamond.
Demetrius Douglas leased an apartment from Devon Drake under a written lease later assigned to Dorothy Daniels. The unit suffered persistent leaks and heating failures that violated the implied warranty of habitability. When Daniels demanded full rent, Douglas withheld payments equal to the cost of repairs he had made. The court permitted the withholding as a defense arising from the lease transaction itself.
Several tenants rented apartments in Clifton Terrace, a three-building apartment complex in Northwest Washington, by separate written leases with First National Realty Corporation. On April 8, 1968, the landlord filed separate actions in the Landlord and Tenant Branch of the Court of General Sessions seeking possession on the ground that each tenant had defaulted in the payment of rent due for the month of April. The tenants admitted that they had not paid the landlord any rent for April but alleged numerous violations of the Housing Regulations as an equitable defense or claim by way of recoupment or set-off. The tenants offered to prove that there are approximately 1500 violations of the Housing Regulations of the District of Columbia in the building at Clifton Terrace, where the defendant resides, some affecting the premises of the defendant directly, others indirectly, and all tending to establish a course of conduct of violation of the Housing Regulations to the damage of defendants. They conceded at trial that this offer of proof reached only violations which had arisen since the term of the lease had commenced. The Court of General Sessions refused the offer of proof and entered judgment for the landlord. The District of Columbia Court of Appeals affirmed, rejecting the argument that the landlord was under a contractual duty to maintain the premises in compliance with the Housing Regulations. Because of the importance of the question presented, the United States Court of Appeals for the District of Columbia Circuit granted the tenants' petitions for leave to appeal.
View caseA claim in recoupment may be asserted only to reduce the amount the account debtor owes the assignee. It does not permit an affirmative recovery exceeding the debt.
Supporting sources
Yes. The assignee steps into the shoes of the assignor and takes the assigned right subject to any defense or claim in recoupment arising from the transaction that gave rise to the contract.
Supporting sources
Transaction-based claims in recoupment under UCC § 9-404(a)(1) may be asserted regardless of when they accrue. Other defenses or claims against the assignor are cut off only after the account debtor receives proper signed notification of the assignment.
Supporting sources
…entire balance due under the contract, $5,197.50, invoking paragraph (g) of the agreement. Defendants filed answer and claim of recoupment, asserting that plaintiff's failure to perform certain maintenance services constituted a prior material breach of the agreement, thus justifying their repudiation of the contract and…