Legal Definitions - de liquido in liquidum

de liquido in liquidum

This is a Latin phrase used in Scots law, which translates to "of a liquid claim against a liquid claim."

In this context, a liquid claim refers to a debt or an amount of money that is certain, fixed, and easily ascertainable without further calculation or dispute. It's an amount that is clearly owed and agreed upon, or can be quickly determined through simple arithmetic or a clear contractual term.

The principle of de liquido in liquidum applies when two parties each have a clear, undisputed financial claim against the other. Instead of each party paying the full amount they owe, these "liquid claims" can be offset against each other. This means the smaller debt is subtracted from the larger one, and only the remaining balance (if any) is paid. This process effectively extinguishes both original claims, either partially or entirely, through a mechanism similar to what is known as "setoff" in other legal systems.

Here are some examples illustrating this concept:

• Example 1: Business Transactions

  Imagine "Alpha Marketing Agency" owes "Beta Web Development" $7,000 for creating a new company website, an amount clearly specified in their contract and invoice. Separately, "Beta Web Development" owes "Alpha Marketing Agency" $4,000 for a social media campaign that Alpha ran for Beta, also a fixed and agreed-upon fee. Both are liquid claims. Instead of Alpha paying $7,000 and Beta paying $4,000, they can apply de liquido in liquidum. Beta's $4,000 debt is set off against Alpha's $7,000 debt, meaning Alpha Marketing Agency only needs to pay the remaining $3,000 to Beta Web Development, and both original claims are settled.

• Example 2: Professional Services

  A client hires an architect for a specific design project, agreeing to pay $10,000 upon completion, which is clearly stated in the service agreement. The architect finishes the work and sends an invoice for this exact amount. During the project, the architect needed to purchase specialized software for $1,500, which the client had explicitly agreed to reimburse, providing a clear receipt. Both the $10,000 owed for the design work and the $1,500 owed for the software reimbursement are liquid claims. Using the principle of de liquido in liquidum, the $1,500 reimbursement can be subtracted from the $10,000 design fee, so the client only pays the architect $8,500, settling both obligations.

• Example 3: Goods and Services Exchange

  A farmer sells a restaurant owner $600 worth of fresh produce, with the amount clearly itemized on an invoice. Separately, the restaurant owner, who also runs a catering service, provides a catered lunch for the farmer's staff picnic, charging a fixed rate of $400, also clearly invoiced. Both the $600 for produce and the $400 for catering are liquid claims. Under de liquido in liquidum, the $400 catering cost can be deducted from the $600 produce bill. The restaurant owner would then pay the farmer only $200, settling both clear financial obligations between them.