When a plaintiff files a lawsuit against a defendant for money owed by the defendant, the defendant often has affirmative defenses that may be claimed. While laws will vary, many jurisdictions allow the defendant to claim a set off as one of his or her defenses. In essence, the term means a claim the defendant has against the plaintiff for money that the plaintiff allegedly owes to the defendant. The term comes from the idea that any amount ultimately owed from the defendant to the plaintiff is "set off" by the sum owed from the plaintiff to the defendant.
The concept of allowing the defendant in a civil lawsuit to claim a set off originated back when defendants were still sent to debtors prisons for owing money. Courts began to realize that the doctrine of equity called for a solution to situations where a defendant was sent to debtors prison despite the fact that the plaintiff in the lawsuit actually owed money to the defendant as well. At the time, civil procedure required for the first lawsuit to be settled before another claim could be addressed. As a result, any claim that the defendant had against the plaintiff was not before the court until after the original lawsuit terminated.
Under the doctrine, or defense, of set off, when a defendant is named in a lawsuit, he or she must file an answer with the court within a specific period of time. In most cases, the answer must include any defenses that the defendant is claiming to the allegations made in the complaint. If the defendant is claiming that the plaintiff owes money to the defendant, then the defendant must claim the set off amount as part of his or her defense when he or she files the answer with the court.
The court will then hear evidence regarding both the original claim made by the plaintiff for money owed by the defendant and evidence regarding the set off amount claimed by the defendant. If the court is satisfied that the both the parties owe money to each other, then the court will typically add the claims together and make one final ruling regarding who owes money to whom. For instance. if the defendant does, indeed, owe the plaintiff $10,000 US dollars (USD), but the plaintiff also owes the defendant $8,000 US dollars (USD), then the final order of the court would be for the defendant to pay the plaintiff $2,000 US dollars (USD).