set-off

in strictness, a set-off is a counterclaim which the defendant may interpose by way of cross-action against the plaintiff. But, broadly speaking, it represents the right which one party has against another to use his claim in full or partial satisfaction of what he owes to the other... it is grounded on the absurdity of making A pay B when B owes A.

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 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."

A counter-claim or demand; a demand set up against another demand, for the purpose of reducing or extinguishing it; the subtraction of the one demand from the other. A set-oflE may be allowed where the demands are independent

1. In law, when 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 that of the plaintiff, either in whole or in part.^ The subtraction or taking away of one demand from another opposite or cross-demand, so as to extinguish the smaller demand and reduce the greater by the amount of the less, or, if the opposite demands are equal, to extinguish both.' Formerly, sometimes called " stoppage," because the amount sought to be set off was stopped or deducted from the cross-demand.' Obtains where the defendant has a debt against the plaintiff arising out of a transaction independent of the contract on which the plaintiff sues, and desires to avail him- ' See Stimson, Am. Stat. Law, § 370. » State V. Primm, 61 Mo. 171 (1875). s Swalley v. People, 116 HI. 350 (1886). • Missouri, &c. E. Co. u Davidson, 14 Kan. 351 (1875). « See United States v. Watkins, 3 Cranch, C. C. 477 (1829). self of that debt in the existiiig suit, either to reduce the plaintiff's recovery or to defeat it altogether; and, as the case may be, to recover a judgment in his own favor for the balance.! The defendant's case must be made out in the same manner as if he sought to maintain a separate action upon it." At common law, the right was not recognized: the defendant had his cross-action. To obviate this circuity of action, 2 Geo. II (1729), c. 22, § 13, allowed mutual debts to be set one against the other, and the matter to be given in evidence under the general issue, or to be pleaded in bar, notice of the particular debt being given beforehand. And 8 Geo. 11 (173,5), c. 24, § 4, enacted that said § 13 should apply to all mutual debts of a different nature except debts acci*ui Dg as a penalty, which were to be pleaded in bar.^ The substance of those statutes has been re-enacted in the States generally, and the principle extended. Antecedently, equity, under peculiar circumstances of right, would compel a plaintiff to submit to a setoff,; but, to obtain this relief, the defendant had to file a sel)arate bill in equity. When the government is plaintiff, no set-off will be allowed, unless Congress has authorized it.* "Offset" has been used, to a limited extent, for set-off. 5 2. In equity, that right which exists between two persons, each of whom, under an independent contract, 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, shall be recovered.6 The mere existence of cross-demands will not be suf Bcient to justify a set-off in equity. Indeed, a setoff is there ordinarily allowed only when the party seeking the benefit of it can show some equitable ground for being protected against his adversary's demand.*^ But set-off is not allowed of a joint debt as against a separate debt, nor vice versa; that is, more generally stated, it is not allowed of debts accruing in different rights — except under special circumstances, as, where fraud has been practiced.* ' Avery v. Brown, 31 Conn. 401 (1863), Sanford, J. 2Gorham v. Bulkley, 49 Conn. 91 (1881). See also Cook V. Mills, 5 Allen, 37 (1862), Bigelow, C. J.; 64 Mi.ss. 663; 49 Mo. 572. 3 See 3 Bl. Com. 805; 2 Story, Eq. §§ 1431-33; Adams, Eq. 222; Chitty, Contr. 12S7; United States v. Eckford, 6 Wall. 488 (1867). 'United States v. Robeson, 9 Pet. *324 (1835); 9 Cranch,236; 39 Cal. 389. 5 Mandeville v. Union Bank, 9 Cranch, 11 (1815). « Adams, Equity, 222. ' 2 Story, Eq. § 1436; Quick v. Lemon, 105 111. 686 0883). Since the statutes of set-off of mutual debts and credits, courts of equity have generally followed the course adopted in the construction of the statutes by courts of law, and have applied the doctrine to equitable debts. They have rarely, if ever, broken in upon the decisions at law, unless some other equity intervened, which justified them in granting relief beyond the rules of law., On the other hand, courts of law sometimes set off equitable against legal debts. ^ In Pennsylvania, set-off is permitted of claims which are not mutual, but this is not in accordance with the general rules of equity. " In Kansas, set-off ia allowed for unliquidated damages.^ Compare Defalcation, 1; Recoupment.

A claim for debt or damages set up by the defendant against the plaintiff in reduction of his claims, v. Recoupment.

Is a remedy which consists in merging two independent demands held by two persons, each against tinguish, as far as amounts permit, a demand held by B against A. And a set-off is a demand of such nature that it may be used thus to extinguish, wholly or in part, the principal demand in an action. Set-off differs from recoupment in that it is more properly applicable to demands independent in their nature and origin; while recoupment (q. v.) implies a cutting down of a demand by deductions arising out of the same transaction. It also differs from counter-claim, which means the mode in which, under the codes of reformed procedure, either a claim in set-off or in recoupment may be interposed in answer to plaintiff's action. In other words, set-off is, as very well defined by Jacob, a mode of defence 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 the whole or in part. This remedy is said to have been unknown to the common law. Under that system, if the plaintiff was as much, or even more, indebted to the defendant than the defendant was to him, yet he had no method of striking a balance, unless the demands were connected. Equity would, however, for many years past, compel defendant, in a proper case, to submit to a set-off; but, to obtain this relief, where one was sued at law yet held a cross-demand against plaintiff, he must file a separate bill in equity. To remedy this inconvenience, it was enacted by Stat. 2 Geo. II. ch. 22, § 13, that, where there are mutual debts between the plaintiff and defendant, or if either party sue or be sued as executor or administrator, where there are mutual debts between the testator or intestate and either party, one debt may be set against the other; and such matter may be given in evidence upon the general issue, or pleaded in bar, as the nature of the case shall require; so as, at the time of his pleading the general issue, where any such debt of the plaintiff, his testator or intestate, is intended to be insisted on in evidence, notice shaU be ■what account it became due, or otherwise such matter shall not be allowed in evidence upon the general issue. This clause was made perpetual by Stat. 8 Geo. II. ch. 24, § 4; and, it having been doubted whether mutual debts of a different nature could be set against each other, it was, by the last-mentioned statute, further enacted and declared that, by virtue of the said clause, mutual debts may be set against each other, either by being pleaded in bar or given in evidence on the general issue, in the manner therein mentioned, notwithstanding that such debts are deemed in law to be of a different nature, unless in cases where either of the said debts shall accrue by reason of a penalty contained in any bond or specialty; and, in all cases where either the debt for which the action hath been or shall be brought, or the debt intended to be set against the same hath accrued, or shall accrue, by reason of any such penalty, the debt intended to be set off shall be pleaded in bar; in which plea shall be shown how much is truly and justly due on either side; and, in case the plaintiff shall recover any such action or suit, judgment shall be entered for no more than shall appear to be truly and justly due to the plaintiff, after one debt being set against the other as aforesaid. These enactments are the origin of the general doctrine of set-off, as applied or invoked by plea or answer in actions of legal cognizance; the principal of them having been adopted by statutes in the various states of the Union, and, indeed, in most of them, extended and reinforced. The jurisdiction of equity to decree and enforce a set-off also continues where equity jurisprudence is distinctly administered; and there is also a useful branch of the remedy consisting in set-off on motion, which is applicable where the two demands are in judgment, so that there is no opportunity to plead one against the other. The privilege, liberally granted in many states, of pleading a counterclaim, is in the nature of a further extension of this remedy. Set-off is a demand which the defendant plaintiff, either altogether or in part. Thus, if the plaintiff sues for ten pounds, due on a note of hand, the defendant may set off nine pounds due to himself from the plaintiff, for merchandise sold to the plaintiff; and, if he pleads such set-off in reduction of the plaintiff's claim, such plea is termed a plea of set-off. A set-off may, therefore, be defined to be a claim which a defendant has upon a plaintiff, and which he sets up or places against the plaintiff's demand. The leading principles of set-off are the following: At law, there was no set-off in case of mutual, unconnected debts until the statutes of set-off (2 Geo. II. ch. 22, and 8 Geo. II. ch. 24) permitted it, in the case of the bankruptcy of either debtor; but, as to connected accounts, the balance was, in the general case, recoverable at law. In equity, set-off has been allowed in the following cases, additional to those at law: In case of mutual Independent debts, contracted upon the faith of a mutual credit (Lanesborough V. Jones, 1 P. Wms. 326); in the case of cross-demands admitting a set-off at law, but of which the one or both are of an equitable nature; in the case of cross-demands arising in different rights, but under particular circumstances, e.g. of fraud {Exp. Stephens, 11 Ves. 24). Brown. Set-off differs from a lien, inasmuch as the former belongs exclusively to the remedy, and is merely a right to insist, ff the party think proper to do so, when sued by his creditor on a counter-demand, which can only be enforced through the medium of judicial proceedings; whilst the latter is,' in effect, a substitute for a suit. 2 Op. Att.- Gen. 677. The term " set-off " is applicable only where the claim set off grows out of a transaction independent of the contract sued on. Avery v. Brown,.31 Cmn. 398.