1. In pleading, a reduction of a plaintiff’s money claim by virtue of a claim of the defendant arising out of a different transaction. Setoff is achieved through a counterclaim. Setoff should be distinguished from recoupment, which involves cross-demands arising out the same transaction. 
1. A discharge or reduction of one demand by an opposite demand. Malle v Harrell, 118 Tex 149, 12 SW2d 550.
A defense or an independent demand made by the defendant to counterbalance that of the plaintiff, in whole or in part. Mack v Hugger Bros. Constr. Co. 153 Tenn 260, 283 SW 448, 46 ALR 389.
The right which exists between two persons, each of whom under an independent contract, express or implied, owes an ascertained amount to the other, to set off their mutual debts by way of deduction so that in an action brought for the larger debt, the residue, only after such deduction, may be recovered. Teeters v City Nat. Bank, 214 Ind 498, 14 NE2d 1004, 118 ALR 383.
A counter demand which a defendant holds against a plaintiff, arising out of a transaction extrinsic to the plaintiff’s cause of action. 20 Am 12d Countcl § 2.
A money demand independent of and unconnected with the plaintiff’s cause of action. Pekofsky v State, 15 Misc 2d 358, 180 NYS2d 930.
In the broad sense, the discharge or reduction of one demand by an opposite one, or the right one party has against another to use his claim in full or partial satisfaction of what he owes to the other. 20 Am .1 2d Countcl § 2.
Simply a mode of defense whereby the defendant acknowledges the justice of the plaintiff’s demand on the one hand, but, on the other, sets up a demand of his own to counterbalance it, either in whole or in part. Peacock Hotel v Shipman, 103 Fla 633, 138 So 44; Steck v Colorado Fuel & Iron Co. 142 NY 238, 37 NE 1.
In relation to transactions in futures, the method by which a con-u tract to purchase is set off against a contract to sell without the formality of an exchange of warehouse receipts or actual delivery of the commodity, being in legal effect a delivery. Lyons Mill Co. v Goffe & Carkener (CA10 Kan) 46 F2d 241, 83 ALR 501.
In respect of a decedent’s estate: — the right of an executor or administrator, who is himself a creditor of the estate, to retain the amount of such debt out of the funds fo the estate in his hands. A term used loosely for the right of an executor or administrator to deduct indebtedness due from a distributee. 31 Am J2d Ex. & Ad § 567. 
l. A defendant’s counterdemand against the plaintiff, arising out of a transaction independent of the Plaintiff’s claim. 
Excerpt from Oliver L. Barbour’s A Treatise on the Law of Set Off (1841):
“Set off is a mode of defence by which the defendant acknowledges the justice of the plaintiff ’s demand, but sets up a demand of his own against the plaintiff, to counterbalance it either in whole or in part.” 
Excerpt from Eugene A. Jones’ Manual of Equity Pleading and Practice (1916):
“Set-off is defined to be a counter-demand, generally of a liquidated debt growing out of an independent transaction for which an action might be maintained by the defendant against the plaintiff.” 
2. A debtor’s right to reduce the amount of a debt by any sum the creditor owes the debtor; the counterbalancing sum owed by the creditor. — Also written set-off: — aka (in civil law) compensation; stoppage. See COUNTERCLAIM; OFFSET. Cf. RECOUPMENT (3).
3. OFFSET; especially, the balancing of mutual liabilities with respect to a pledge relationship. — set off, vb.
1. A claim made for the purpose of reducing or nullifying another claim; a counterclaim; a recoupment; a setoff.
2. A balancing or compensating factor; a deduction. 
1. Something (such as an amount or claim) that balances or compensates for something else; SETOFF (3). 
Excerpt from Ann Taylor Schwing, California Affirmative Defenses (2d ed. 1996):
“Both setoff and recoupment existed at common law, but their scope has been modified, expanded, and ultimately merged by subsequent statutory and decisional law. The final equitable concept of ‘offset’ recognizes that the debtor may satisfy a creditor’s claim by acquiring a claim that serves to counterbalance or to compensate for the creditor’s claim. . . . [C]ourts use the terms ‘offset’ and ‘setoff’ interchangeably, often switching between them from sentence to sentence, supporting the conclusion that there is no substantive difference between them.” 
1. The practice of investing in a foreign nation’s industry to “repay” that nation for business transacted in the investor’s nation. 
1. To balance or calculate against; to compensate for <the gains offset the losses>. 
Excerpt from Thomas W. Waterman’s A Treatise on the Law of Set-Off, Recoupment, and Counter Claim (2d ed. 1872):
“Set-off signifies the subtraction or taking away of one demand from another opposite or cross demand, so as to distinguish the smaller demand and reduce the greater by the amount of the less; or, if the opposite demands are equal, to extinguish both. It was also, formerly, sometimes called stoppage, because‘ the amount to be set-off was stopped or deducted from the cross demand.” 
Excerpt from Edwin E. Bryant’s The Law of Pleading Under the Codes of Civil Procedure (2d ed. 1899):
“Before considering the counter-claim, a brief reference to ‘the set-off’ as known in former practice is necessary. By the common law, the setting off of one demand against another in the same action was unknown. If A had a cause of action in debt against B, and B had another cause of action in debt in equal amount against A, each must bring his action. One could not be set off against the other. This was changed by statute in England in 1729, by a provision which, somewhat enlarged and modified, has been generally adopted in this country.” 
equitable setoff – (18c) A setoff that a court may allow based on principles of fairness.
legal setoff – (18c) A setoff that meets statutory requirements. 
Excerpt from Charles Alan Wright’s Federal Practice and Procedure (2d ed. 1990):
“Under [Fed. R. Civ. P.] Rule 13 the court has broad discretion to allow claims to be joined in order to expedite the resolution of all controversies between the parties in one suit. Rule 13(c) specifically provides that the counterclaim ant is not limited by recovery sought by the opposing party but may claim relief in, excess of that amount. Further, the general legal rule is that it is immaterial whether a counterclaim is legal or equitable for purposes of determining whether it properly is brought under Rule 13. . . . The expectation is that this liberal joinder policy will further the elimination of circuity of action and multiple litigation.” 
Disclaimer: All material throughout this website is pertinent to people everywhere, and is being utilized in accordance with Fair Use.
: Ballantine’s Law Dictionary with Pronunciations
Third Edition by James A. Ballantine (James Arthur 1871-1949). Edited by William S. Anderson. © 1969 by THE LAWYER’S CO-OPERATIVE PUBLISHING COMPANY. Library of Congress Catalog Card No. 68-30931
: Oliver L. Barbour, A Treatise on the Law of Set Off 3 (1841).
: Eugene A. Jones, Manual of Equity Pleading and Practice 65 p.42 (1916).
: Ann Taylor Schwing, California Affirmative Defenses (2d ed. 1996):
: Thomas W. Waterman, A Treatise on the Law of Set-Off, Recoupment, and Counter Claim § 1, at 1 (2d ed. 1872).
: Edwin E. Bryant, The Law of Pleading Under the Codes of Civil Procedure 250-51 (2d ed. 1899).
: 6 Charles Alan Wright et al., Federal Practice and Procedure 5 1403, at 15-16 (2d ed. 1990).
Back to Pleadings
Like this website?
or donate via PayPal:
This website is being broadcast for First Amendment purposes courtesy of
We look forward to hearing from you!