Setoff/Recoupment

Question 1

Steps for setoff/recoupment?

Answer 1

1. UCC or CL
2. Label the parties (obligor, assignor, assignee?)
3. Define setoff and recoupment

Question 2

Define setoff/recoupment

Answer 2

May the obligor use against the assignee defenses or claims that the obligor has against the assignor? Yes, these defenses are called recoupment and setoff.

Under §9-404, the rights of an assignee are subject to all terms of the agreement between the account debtor and assignor and any defense or claim in recoupment arising from the transaction that gave rise to the contract; and any other defense or claim of the account debtor against the assignor against the assignor which accrues before the account debtor receives a notification of the assignment by the assignor or the assignee (setoff).

Question 3

What is a recoupment?

Answer 3

Recoupment is a defense arising out of the assigned contract between the obligor and the assignor and may be used by the obligor against the assignee at any time.

Question 4

What is a setoff?

Answer 4

A set off is a defense not arising from the assigned contract, but rather from some other claim between the obligor and assignor and may be used against the assignee only if the claim accrued before the notice was given to the obligor of the assignment.