Legal Definitions - concursus debiti et crediti

The legal term concursus debiti et crediti, originating from Scots law, translates to "a running together of debt and credit."

This principle refers to the requirement that for two debts to be offset against each other (a process known as "compensation"), the exact same two parties must owe each other money, each in their own right, and at the same time. Essentially, for debts to "run together" and cancel each other out, the roles of debtor and creditor must be perfectly reciprocal between the same two entities or individuals.

• Example 1: Valid Concursus

  Imagine Sarah, a freelance graphic designer, owes "PrintPro Services" $300 for printing business cards for her personal use. Separately, "PrintPro Services" hired Sarah to design a new logo for their company, for which they owe her $500. In this scenario, Sarah owes PrintPro Services, and PrintPro Services owes Sarah. Both debts exist between the same two parties, each acting in their own capacity. Therefore, there is a concursus debiti et crediti, and PrintPro Services could potentially offset the $300 Sarah owes them against the $500 they owe her, meaning they would only pay Sarah the remaining $200.

• Example 2: Invalid Concursus (Different Parties)

  Consider "Green Gardens Inc.," a landscaping company, which owes "Supply Depot Co." $1,500 for gardening tools. Separately, the owner of Green Gardens Inc., Mr. Thompson, personally lent $2,000 to the owner of Supply Depot Co., Ms. Rodriguez, to help her with a personal home renovation. If Supply Depot Co. sues Green Gardens Inc. for the $1,500, Mr. Thompson cannot argue that this debt should be offset by his personal loan to Ms. Rodriguez. The reason is that the parties are not the same: "Green Gardens Inc." owes "Supply Depot Co.," but Mr. Thompson (an individual) lent money to Ms. Rodriguez (an individual). There is no concursus debiti et crediti between the corporate entities for the first debt and the individuals for the second debt.

• Example 3: Invalid Concursus (Different Capacities)

  Suppose Dr. Lee, a dentist, owes "Medical Supplies Ltd." $1,000 for equipment purchased for her dental practice. At the same time, Dr. Lee's husband, Mr. Lee, who is a contractor, performed some renovation work on the personal residence of the owner of "Medical Supplies Ltd.," Mr. Chen, and Mr. Chen owes Mr. Lee $1,200 for this work. Dr. Lee cannot claim that the $1,000 her practice owes "Medical Supplies Ltd." should be offset by the $1,200 Mr. Chen owes her husband. Although the families are connected, the debts are not between the same parties acting in the same capacity. Dr. Lee's professional entity owes a company, while Mr. Chen (an individual) owes Mr. Lee (an individual). The debts do not "run together" in the required manner.