Legal Definitions - Setoff

Definition: Setoff is a legal right that allows a person who owes money to subtract from the debt any money owed in the other direction. It can also refer to a defendant's monetary demand against the plaintiff for some injury unrelated to the plaintiff's claim.

Example 1: John owes $500 to Jane for a loan she gave him. However, Jane also owes John $200 for some work he did for her. In this case, John can use the setoff right to subtract the $200 from the $500 he owes Jane, and he only needs to pay her $300.

Example 2: In a lawsuit, the plaintiff is seeking $10,000 in damages from the defendant for a car accident. However, the defendant claims that the plaintiff owes him $5,000 for some repairs he did on the plaintiff's car before the accident. The defendant can use the setoff right to demand that the plaintiff pays him the $5,000 before any damages are awarded.

These examples illustrate how setoff works in different situations. It allows for a fair and balanced resolution of debts and claims between parties.