Also known as: set off · setoff · set-offs · sets off · setting off · offset · counterclaim
Written by attorneys · grounded in primary & secondary sources — see below
A right or claim allowing one party to deduct an amount owed to it by another from an amount it owes, thereby reducing or extinguishing the net obligation between them.
Stella Shapiro sues Sapphire Technologies in federal court alleging a state-law contract claim. Sapphire answers with a counterclaim asserting a federal antitrust violation as a set-off to reduce any recovery Stella might obtain. The court dismisses the counterclaim for lack of arising-under jurisdiction because the federal issue appears only in the defensive pleading.
Seth Shapiro, a limited partner in Solstice Ventures, owes the partnership $40,000 on a prior loan. When the partnership approves an interim distribution of $60,000 to Seth, the general partner withholds $40,000 under the set-off provision and pays Seth only the remaining $20,000.
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Sophia Singh, a partner in Silverline Industries, owes the partnership $25,000 for personal expenses charged to the firm account. Upon approval of a $50,000 distribution to Sophia, the managing partner applies the set-off and remits only $25,000 to her.
Serena Soto sues in federal court on a state-law note. The defendant raises a time-barred counterclaim as a set-off to reduce the judgment. The court permits the set-off to the extent it reduces recovery, applying state law under the Erie doctrine even though the counterclaim itself would be barred if brought affirmatively.
Sabrina Shah brings a state-law class action against Southland Foods. The defendant asserts a set-off counterclaim against class members who owe the company on separate accounts. The court treats the set-off as a permissive counterclaim requiring independent jurisdictional grounds for any affirmative relief beyond reducing the class recovery.
Selena Singh withholds rent after the landlord fails to repair heating violations. In the ensuing eviction action she asserts the repair costs as a set-off against the rent claimed. The court allows the set-off to reduce the amount due, treating it as recoupment arising from the same lease transaction.
No. A federal court cannot base arising-under jurisdiction on a federal defense or counterclaim. Jurisdiction depends solely on the plaintiff's well-pleaded complaint.
The partnership may offset any amount the partner or dissociated partner owes it against a distribution to which the partner or transferee is entitled.
Recoupment arises from the assigned contract itself and may be asserted against the assignee even if it accrued after notice. Set-off arises from a separate transaction and is cut off once the assignee notifies the obligor.
Yes. Most jurisdictions permit the personal representative to set off a debt owed by the beneficiary to the testator against the beneficiary's share, especially when the debt is liquidated.
A permissive set-off counterclaim generally requires independent jurisdiction if affirmative relief is sought, but a purely defensive set-off used only to reduce the plaintiff's recovery may proceed without it.
…Zoning and the Preservation of Urban Landmarks, 85 Harv. L. Rev. 574, 574 n. 1 (1972), citing Huxtable, Bank’s Building Plan Sets Off Debate on “Progress,” N. Y. Times, Jan. 17, 1971, section 8, p. 1, col. 2. [^maj-3]: See, e. g. , N. Y. C. Admin. Code § 205-1.0 (a) (1976). [^maj-4]: Gilbert, Introduction, Precedents…