Davis Erection Co., Inc. v. Jorgensen
534 N.W.2d 746 | Nebraska Supreme Court | 1995
What This Case Means for Subcontractors
Davis Erection sued to collect money owed by Jorgensen, and tried to garnish (seize) payments that Eriksen Construction owed to Jorgensen. Eriksen claimed it didn't owe Jorgensen anything because it had the right to offset (subtract) its own claims against Jorgensen from what it owed. The Nebraska Supreme Court ruled that you cannot use a setoff unless you take clear action to claim it—like sending written notice or making entries in your books. The court reversed the lower court's decision and sent the case back for trial.
Key Takeaways
- •If you want to offset money owed to you against money you owe a contractor, you must document it in writing or in your records at the time you claim the setoff. Silence or informal agreement won't work.
- •Setoffs only work against money that is certain and due now. You cannot offset uncertain, future, or contingent claims (like potential damages or disputed change orders) against money you definitely owe today.
- •Keep contemporaneous written records of any setoff claims—emails, letters, or accounting entries dated when you first assert the right. This protects you if the debt is later collected through garnishment.
Setoff requires intent, action, and record evidencing exercise of the right.
Frequently Asked Question
Can I subtract what a contractor owes me from what I owe them without telling them?
No. To claim a setoff, you must take affirmative action—send written notice, make accounting entries, or create other documented evidence that you're exercising the setoff right. Simply withholding payment without notice is not enough. Also, you can only setoff claims that are certain and due now, not uncertain or future claims.
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