A more thorough explanation:

Recoupment is a legal term that refers to the recovery or collection of money that was previously paid out improperly. It can also be used as a defense by a defendant to reduce a plaintiff's claim by an amount the defendant argues that the plaintiff owes the defendant arising from the same transaction.

For example, if a person sues another person for breach of contract, the defendant may argue that they are entitled to recoupment because the plaintiff also breached the contract in some way. This would allow the defendant to reduce the amount of damages they owe to the plaintiff.

Recoupment is different from a setoff because it is not an independent claim, but rather an equitable remedy. The purpose of recoupment is to ensure a fair and just result by allowing the court to consider the entire transaction in context.

One example of recoupment is in the case of F.D.I.C. v. Kooyomjia. In this case, the defendant raised a recoupment defense for an action to enforce a promissory note and foreclose on a mortgage. The defendant argued that the initial contracts were breached and that the plaintiff fraudulently induced them into signing them. The court emphasized that a recoupment defense must arise from the same transaction as the plaintiff’s original claim and denied plaintiff’s arguments that the contracts were unrelated because of an exception for certain foreclosed loans.

Another example of recoupment is in the case of RPM Plumbing Mechanical v. Plunkett. In this case, the Missouri Court of Appeals pointed out that recoupment is a “purely defensive matter going only to the reduction or satisfaction of the plaintiff’s claim.” This means that recoupment can only be used to reduce the amount of damages owed to the plaintiff, not to seek damages from the plaintiff.