“Setoff” and “Offset”

Updated 5 July 2022: By all that is holy, ignore this post and instead consult this 2022 post!

Today I encountered in a contract the following use of offset:

Unless it has notified Company otherwise, the Vendor shall offset the Search Fees payable by the Company under this Agreement against the Vendor’s payment obligations to Company under this agreement.

To asses the merit of this use of offset, first let’s consider a different word, setoff. Here’s part of the entry for setoff in Garner’s Dictionary of Legal Usage:

setoff, n., = (1) a counterdemand, generally of a liquidated debt growing out of an independent transaction for which a lawsuit might be maintained; or (2) the general right of a debtor to reduce the amount of a debt by any sum that the creditor owes the debtor. …

As a verb, the term is written as two words—e.g.: “on the other hand, a subsequent agreement between the parties to set-off [read set off] a claim of the buyer in satisfaction of part of the purchase price may satisfy the statute.”

So, how does that compare to offset? As regards its use as a noun, GDLU says that offset is equivalent to setoff and is commonplace, and it offers some examples.

As regards use of offset as a verb, it says that it “might be considered inferior to set off, although it cannot rightly be condemned as an error.” But consider the two examples offered in GDLU. Here’s one of them:

“The division of property was, or will be, approximately equal and the two amounts would offset each other.” Welsh v. Welsh, 869 S.W.2d 802 (Mo. Ct. App. 1994).

But in both this example and the second example, offset is used as a stative verb. By contrast, in the example that prompted this post, offset is used as a dynamic verb. Here’s what the useful University of Victoria page on dynamic and stative verbs (here) has to say:

Verbs in English can be classified into two categories: stative verbs and dynamic verbs. Dynamic verbs (sometimes referred to as “action verbs”) usually describe actions we can take, or things that happen; stative verbs usually refer to a state or condition which is not changing or likely to change.

A couple of examples:

  • Dynamic: She play tennis every Friday.
  • Stative: I hate chocolate.

The Wikipedia page on the subject (here) notes that “The same verb may act as stative or dynamic. An English phrase like ‘he plays the piano” may be either stative or dynamic, according to context.'” Well, offset is that kind of verb.

Why does this matter to us? Use of offset as a stative verb in legal contexts matches its colloquial use, as in My curiosity was offset by my shyness. By contrast, use of offset as a dynamic verb is unorthodox. Because the alternative, set off, is well established, that’s what you should use instead. That being the case, it make sense, for the sake of consistency, to stick with the noun form, setoff, too.


About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

5 thoughts on ““Setoff” and “Offset””

  1. Although it’s not something I get set off by, is it possible that some find it sounds confrontational to use the verb “setoff”, which sounds the same as the two-word pair “set off”? thefreedictionary.com defines (in its page on “set”) that “set off” means “To make suddenly or demonstrably angry”, and also actually has various initiating connotations, such as “To cause to explode” or “To start on a journey”. Does the fact that it’s common legal jargon automatically and sufficiently overcome such competing denotations and connotations in human language?
    I sometimes find in my (non-legal) writing that I prefer to select wordings that I think will avoid what I call a “snag”, which is my name for a term that isn’t wrong but that might by its mere usage cause the user to go down a path I don’t want them going down even when I can defend why my usage shouldn’t have sent them there. It’s just a conversation you don’t want to have sometimes. My naive expectation would be that legal writing aggressively seeks to avoid such snags and so might prefer to sometimes grab less-preferred synonyms, but I’m curious what your thought is on this since that’s your bread and butter.
    Back to your example, the simple insertion of whitespace (which means there is no difference when read aloud) in the phrase “the Vendor shall set off the Search Fees” might make the author nervous that the text could be construed as (or merely confused with) “initially there will be no Search Fees but at some point in time the Vendor has an affirmative obligation to put such fees into play”. The normally-awkward use of the verb form of “offset” might avoid that because the “off” is placed where it cannot take on the “set off” meaning, and it might be that any linguistic style debate is preferable to a meaning debate. Or so it occurs to me. (Disclaimer: I am not a lawyer, just an interested soul looking in.)

    • I applaud your instinct, but contract language is such a minefield, with habit and caselaw constraining choices, that one has to be careful about imposing change. I opt for novelty only when all other options are too dysfunctional to contemplate. (See represents and warrants.) In that regard, I’m OK with setoff (noun) and set off (verb).

  2. Ken:

    Perhaps a better approach might be to say “credit”:

    “Unless it has notified Company otherwise, the Vendor shall credit the Search Fees payable by the Company under this Agreement towards the Vendor’s payment obligations to Company under this agreement.”


      • Ken:

        It might, in strange situations, such as if:
        – the Vendor has strange accounting rules, like those that governed American firms in the dot-com boom before the round-trip barter rules came in, such that the actual value of Vendor’s services matter less than the notional value
        – taxes apply to the Company’s sales, but only to payments for them, not barter
        – the Vendor can’t write checks, or can’t write them to the Company, or can’t write them in the full amount
        – the Vendor’s cash is subject to a very badly written lien, where the Vendor isn’t subject to an agreement that would prevent this kind of thing



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