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Simple English definitions for legal terms
equitable right to setoff
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A quick definition of equitable right to setoff:
An equitable right to setoff is when a bank can take money from a customer's account to pay off debts that the customer owes to the bank. It's like if you owe your friend money and they take it out of the allowance you owe them. A covenant is a promise or agreement, usually in a contract or deed. It can be a promise to do something or not do something. For example, if you promise to keep your yard clean, that's a covenant. If you promise not to sell your house to someone, that's also a covenant. Some covenants are binding on future owners of the property, while others are only between the original parties.A more thorough explanation:
The equitable right to setoff is a legal term that refers to the right of a bank to cancel cross-demands. This is usually done by taking the amount owed by a customer from their deposit accounts. For example, if a customer owes the bank $100 and has $50 in their account, the bank can use the equitable right to setoff to take the $50 and apply it towards the customer's debt.
One example of the equitable right to setoff is when a customer has a loan with a bank and also has a deposit account with the same bank. If the loan becomes due and the customer has not paid it, the bank can use the funds in the deposit account to pay off the loan.
Another example is when a customer has multiple accounts with a bank, such as a checking account and a savings account. If the customer owes the bank money and has funds in both accounts, the bank can use the equitable right to setoff to take the funds from one account to pay off the debt in the other account.