Equitable Right to set off Law and Legal Definition

Equitable right to set off is a right developed from the principle of equity. Equitable right to set off is a debtor’s right to reduce the amount of a debt by any sum a creditor owes the debtor. A debtor through his/her equitable right to set off can counter demand against a creditor. Equitable right to set off arises out of a transaction that is independent of the creditor’s claim.

The basic principle giving rise to equitable right to set off is prevention of injustice in permitting one person to enforce a claim, while at the same time on account of his/her insolvency the other party with an equally meritorious claim is left with demand wholly unenforceable against an insolvent debtor.[Fischer v. Pope, 233 Ala. 301 (Ala. 1937)]