Legal Definitions - recoupment

Recoupment is a legal principle that allows a party being sued to reduce or eliminate the amount they owe by asserting their own claim against the plaintiff, provided both claims arise from the same transaction or event. It is a defensive measure, not an independent lawsuit, designed to ensure fairness by considering the entire context of a dispute.

Essentially, if someone sues you for money, and you believe they owe you money or breached a duty related to that exact same situation, you can use recoupment to argue that their claim should be lowered or canceled out.

Here are some examples illustrating recoupment:

• Construction Dispute: A homeowner hires a contractor to build a new deck. After the deck is completed, the contractor sues the homeowner for the final payment. The homeowner, however, argues that the contractor used substandard materials and performed shoddy work, requiring them to spend extra money to fix the defects.

  How it illustrates recoupment: The homeowner would use recoupment to reduce the amount owed to the contractor. Their claim for defective work arises directly from the same construction contract for which the contractor is demanding payment, making it a valid defensive argument to lower the contractor's claim.

• Software Development Contract: A software development company sues a client for unpaid invoices for a custom application. The client responds by claiming that the software delivered was buggy, incomplete, and failed to meet the agreed-upon specifications, causing them significant operational losses.

  How it illustrates recoupment: The client would argue for recoupment, asserting that the software company's failure to perform its duties effectively under the same software development contract should reduce or negate the fees they are being sued for. Both claims stem from the identical project.

• Commercial Lease Agreement: A landlord sues a tenant for several months of unpaid rent. The tenant counters that the landlord failed to maintain the property as stipulated in the lease, specifically neglecting essential repairs to the heating system and roof, which made parts of the premises unusable for their business.

  How it illustrates recoupment: The tenant would seek recoupment, arguing that the landlord's breach of their obligations (failure to make repairs) within the same lease agreement should reduce the amount of rent they owe. The tenant is not seeking separate damages but rather a reduction in the landlord's claim based on the landlord's own breach related to the same contract.