Set-Off in United States

Set-off Definition

In practice. A demand, growing out of a distinct transaction, which a defendant makes against the plaintiff in the suit for the purpose of liquidating the whole or a part of his claim. See 7 Fla. 329. A set-off was unknown to the common law, according to which mutual debts were distinct, and inextinguishable except by actual payment or release. 1 Rawle (Pa.) 293; Babington, Set-Oflf, 1. St. 2 Geo. II. c. 22, which has been generally adopted in the United States, with some modifications, in cases of mutual debts, however, allowed the defendant to set his debt against the other, either by pleading it in bar, or giving it in evidence, when proper notice had been given of such intention, under the general issue. The statute, being made for the benefit of the defendant, is not compulsory (8 Watts [Pa.] 39) ; the defendant may waive his right, and bring a cross action against the plaintiff (2 Campb. 594; 5 Taunt. 148; 9 Watts [Pa.] 179). It seems, however, that in some cases of intestate estates and of insolvent estates, perhaps owing to the peculiar wording of the law, the statute has been held to operate on the rights of the parties before action brought or an act done by either of them. 2 Rawle (Pa.) 293; 3 Bin. (Pa.) 135; Bac. Abr. Bankrupt (K). See 7 Gray (Mass.) 191, 425. Set-off takes place only in actions on contracts for the payment of money, as, assumpsit, debt, and covenant. A set-off is not allowed in actions arising ex delicto; as upon the case, trespass, replevin, or detinue. Buller, N. P. 181; 4 E. D. Smith (N. Y.) 162. The matters which may be set off may be mutual liquidated debts or damages; but unliquidated damages cannot be set off. 3 Bosw. (N. Y.) 560; 34 Pa. St. 239; 34 Ala. (N. S.) 659; 20 Tex. 31; 2 Head (Tenn.) 467; 2 Mete, (Ky.) 143; 3 Iowa 163; 8 Iowa 325; 1 Blackf. (Ind.) 394; 8 Conn. 325; 6 Halst. (N. J.) 397; 5 Wash. C. C. (U. S.) 232. The statutes refer only to mutual unconnected debts; for at common law, when the nature of the employment, transaction, or dealings necessarily constitutes an account consisting of receipts and payments, debts and credits, the balance only IS considered to be the debt, and therefore in an action it is not necessary in such cases either to plead or give notice of setoff. 4 Burrows, 2221. Distinguished from counterclaim and recoupment. Counterclaim is a term of statutory origin, and includes both set-off and recoupment, and something more. It embraces all sorts of claims which a defendant may have against a plaintiff in the nature of a cross action or demand, or for which a cross or separate action would lie. 13 How. Pr. (N. Y.) 84. In recoupment, the defendant’s claim must arise from the same transaction as the plaintiff’s, and in this it is distinguished from set-off, which must arise in a distinct claim. See Recoupment.

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Legal Issue for Attorneys

In practice. A demand, growing out of a distinct transaction, which a defendant makes against the plaintiff in the suit for the purpose of liquidating the whole or a part of his claim. See 7 Fla. 329. A set-off was unknown to the common law, according to which mutual debts were distinct, and inextinguishable except by actual payment or release. 1 Rawle (Pa.) 293; Babington, Set-Oflf, 1. St. 2 Geo. II. c. 22, which has been generally adopted in the United States, with some modifications, in cases of mutual debts, however, allowed the defendant to set his debt against the other, either by pleading it in bar, or giving it in evidence, when proper notice had been given of such intention, under the general issue. The statute, being made for the benefit of the defendant, is not compulsory (8 Watts [Pa.] 39) ; the defendant may waive his right, and bring a cross action against the plaintiff (2 Campb. 594; 5 Taunt. 148; 9 Watts [Pa.] 179). It seems, however, that in some cases of intestate estates and of insolvent estates, perhaps owing to the peculiar wording of the law, the statute has been held to operate on the rights of the parties before action brought or an act done by either of them. 2 Rawle (Pa.) 293; 3 Bin. (Pa.) 135; Bac. Abr. Bankrupt (K). See 7 Gray (Mass.) 191, 425. Set-off takes place only in actions on contracts for the payment of money, as, as
sumpsit, debt, and covenant. A set-off is not allowed in actions arising ex delicto; as upon the case, trespass, replevin, or detinue. Buller, N. P. 181; 4 E. D. Smith (N. Y.) 162. The matters which may be set off may be mutual liquidated debts or damages; but unliquidated damages cannot be set off. 3 Bosw. (N. Y.) 560; 34 Pa. St. 239; 34 Ala. (N. S.) 659; 20 Tex. 31; 2 Head (Tenn.) 467; 2 Mete, (Ky.) 143; 3 Iowa 163; 8 Iowa 325; 1 Blackf. (Ind.) 394; 8 Conn. 325; 6 Halst. (N. J.) 397; 5 Wash. C. C. (U. S.) 232. The statutes refer only to mutual unconnected debts; for at common law, when the nature of the employment, transaction, or dealings necessarily constitutes an account consisting of receipts and payments, debts and credits, the balance only IS considered to be the debt, and therefore in an action it is not necessary in such cases either to plead or give notice of setoff. 4 Burrows, 2221. Distinguished from counterclaim and recoupment. Counterclaim is a term of statutory origin, and includes both set-off and recoupment, and something more. It embraces all sorts of claims which a defendant may have against a plaintiff in the nature of a cross action or demand, or for which a cross or separate action would lie. 13 How. Pr. (N. Y.) 84. In recoupment, the defendant’s claim must arise from the same transaction as the plaintiff’s, and in this it is distinguished from set-off, which must arise in a distinct claim. See Recoupment.

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This definition of Set-off is based on The Cyclopedic Law Dictionary. This entry needs to be proofread.

Practical Information

Note: Some of this information was last updated in 1982

When two parties each owe an ascertained amount to the other, the defendant may deduct what the plaintiff owes him or her from the amount the defendant owes the plaintiff.

(Revised by Ann De Vries)

What is Set-Off?

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