Ning Sheng, Inc. v. Howard Berger Co., Inc.

97-604 (U.S. Dist. Ct. D. N.J. 1998) (Unpublished)
  • Opinion Date: March 16, 1998

UCC; CONTRACTS—Under Article 2 of the UCC there is no right of setoff between unrelated transactions but under the common law there may be a right of equitable setoff even between independent contractors.

A buyer of goods accepted title but stopped payment to the supplier. When the supplier sued for breach of contract, the buyer counterclaimed for costs incurred from a prior unrelated transaction with the supplier. The buyer argued it had a right to withhold payment as a setoff against its previous unrelated losses. The District Court first looked to the UCC, which allows setoff only against transactions that are part of the same contract. Since there was no continuing contract connecting the prior and the current transactions the Court rejected buyer’s setoff argument. However, the Court denied summary judgment, stating that the buyer may have a right of equitable setoff, which exists even where the party’s obligations stem from independent contracts.