A demand made by the defendant against the plaintiff that is based on some transaction or occurrence other than the one that gave the plaintiff grounds to sue.
The set-off is available to defendants in civil lawsuits. Generally, civil actions are brought by plaintiffs seeking an award of damages for injuries caused by the defendant. In customary practice the plaintiff files the suit and the defendant answers it. The defendant may assert a counterclaim against the plaintiff based on an event or transaction other than the event or transaction that forms the basis of the plaintiff's suit. A set-off is a counterclaim with the particular goal of defeating or diminishing the amount the defendant will have to pay if the plaintiff's suit succeeds.
The set-off has two distinctive features. It must be based on an entirely different claim from that of the plaintiff, and it must be a valid legal claim that the defendant could bring as a separate suit. For example, a stereo store sues a customer for $700 due in outstanding payments on a CD player. However, the customer's car was damaged in the store's parking lot when the store's delivery van backed into it, and the repairs cost $500. As the defendant, the customer has the right to assert a counterclaim for damages to the car; if the customer is successful, the set-off reduces the amount owed to the plaintiff store so that the defendant owes the plaintiff only $200.
The remedy of recoupment is similar in effect to a set-off but differs from it in several respects. Whereas a set-off is based on a different claim, recoupment is a common-law remedy based specifically on the contract between the plaintiff and defendant that gave rise to the suit. It allows defendants to claim damages against the plaintiff under two conditions: where the plaintiff has not complied with some contractual obligation or where the plaintiff has violated some duty that the law imposed in the making or performance of the contract. Recoupment usually occurs in cases where the plaintiff has performed only a portion of the contract and sues for compensation for the partial performance. For example, the defendant in the stereo store's action might demand recoupment for the store's failure to service the stereo under its warranty.
Like all counterclaims, set-off and recoupment seek to achieve justice by balancing the plaintiff's and the defendant's rights. They are designed to prevent a plaintiff from recovering complete damages from a defendant who has suffered injury or damages caused by the plaintiff. They can also save time and money. By combining the entire controversy within one action, recoupment and set-off prevent the courts from being inundated with multiple lawsuits.