Recoupment Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Recoupment, written in plain English, along with examples of how it is used.

What is Recoupment?

(n) Recoupment is the recovery of amount due to a person, by deducting the same from the amount due, decreed to pay or otherwise become payable, to the other party. In a way it is settling of the admitted claim by paying the balance or difference.

History and Meaning of Recoupment

Recoupment is a common law principle that dates back to the medieval era. The term is often used in the legal and financial contexts, and it is defined as the process of deducting losses or expenses from a sum of money owed, rather than paying the full amount.

Recoupment is generally used as a defense mechanism, as it allows a party who owes money to offset that debt with a claim against the creditor. It is typically used in cases where there are mutual obligations between the parties, and the obligations are both due and payable.

##Examples of Recoupment

  1. A company overpaid an employee by mistake and the employee then leaves the company without paying back the excess. In such a case, the company can recoup the overpaid amount from the employee's final wages.

  2. A landlord and tenant have a dispute over non-payment of rent. The tenant claims that the landlord has failed to make necessary repairs to the property, leading to the tenant’s nonpayment. In this case, the landlord may use the rent owed as a recoupment, for the cost of repairs.

  3. A customer hires a contractor to build a deck, but the deck collapses shortly after construction. The customer withholds payment for the deck until the contractor rectifies the issue. In this scenario, the contractor can use the payment owed as a recoupment for any costs associated with the repairs.

##Legal Terms Similar to Recoupment

  1. Set-Off: A legal right to offset one debt against another.

  2. Counterclaim: Claim by a defendant against a plaintiff, that, if proven, will offset some or all of the plaintiff’s claim.

  3. Restitution: Payment for a loss or injury; restoration or reimbursement of something taken.