What does setoff mean

1 : the reduction or discharge of a debt by setting against it a claim in favor of the debtor specifically : the reduction or discharge of a party’s debt or claim by an assertion of another claim arising out of another transaction or cause of action against the other party.

We would like to set off for Paris by 10 o’clock tomorrow morning. As soon as the alarm went off it set off the dogs. We didn’t sleep at all. The fact that he cannot remember to take his books to school really sets me off.

A set-off clause is a legal clause that gives a lender the authority to seize a debtor’s deposits when they default on a loan. A set-off clause can also refer to a settlement of mutual debt between a creditor and a debtor through offsetting transaction claims.

We set off early the next morning. Jeff pushed open the front door, which set off the alarm. Somebody was setting off fireworks down the street. He fears that the election could set off mass protests.

Set Off & Counter Claim

Set-off is a statutory defence to a plaintiff’s action, whereas a counterclaim is substantially a cross-action. Set-off must be for an ascertained sum or must arise out of the same transaction as the plaintiff’s claim. A counter-claim need not arise out of the same transaction.

The right to set-off dealt with by Order 8, Rule 6 of the Code is called a legal set-off. Legal set-off can be claimed under this rule only in respect of an ascertained sum of money legally recoverable by the defendant from the plaintiff arising out of two different transactions.

Where a party has more than one account, a bank is entitled to set off one credit balance against another debit balance. This is an important right to be aware of in the context of insolvency.