An offset is something used to counter-balance something else. This is often seen in a financial context where one sum offsets another amount. It can also be referred to as a “setoff” especially when concerning money. For example, if Party A owes Party B $30, but Party B owes Party A $20, the second amount would offset the first (money owed against money owed), which reduces the amount of money that Party A owes B to only $10. In the context of a lawsuit, this would be raised by a counterclaim filed by a defendant. By claiming an offset, the defendant does not necessarily deny the plaintiff's original demand, but seeks to reduce the amount of money owed to the plaintiff by the amount that the plaintiff owes to the defendant. If not raised as a counterclaim, an offset could also be used as a defense to reduce damages by an amount that the defendant already paid the plaintiff. In business, an extra reserve may be used to offset a loss.
An offset may also be used in other contexts not involving money. It often describes balances affecting land, pollution, construction, and other actions in the physical world. For instance, a pollution reduction in one operation may be used to offset pollution generation in another. There is also no requirement that an offset be of the same kind as the thing it is set against. In contractual relationships, the value of a duty to be performed is often used to offset a debt owed.
[Last updated in August of 2020 by the Wex Definitions Team]