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Recoupment is the setting forth of a demand arising from the same transaction as the plaintiff's claim, to abate or reduce that claim. It is the means used to determine the proper liability on the amounts owed. Recoupment is in the nature of a defense arising out of some feature of the transaction upon which the plaintiff's action is grounded. Recoupment, is a creditor's right long recognized in bankruptcy proceedings.
Recoupment asserted as a defense is not an "offset" to a claim. Recoupment is not calculated by the net amount due from one party to the other computed by subtracting one claim from the other, but rather is the amount of the plaintiff's claim alone on a particular contract, transaction or event. An offset or setoff can be money owed from any matter, including outside the lawsuit. Recoupment is a defense that goes to the foundation of plaintiff's claim by deducting from plaintiff's recovery all just allowances or demands accruing to the defendant with respect to the same contract or transaction.