LegalDeal Structure
Offset Rights
Also known as: Indemnity offset, setoff rights, deduction rights, netting rights
The buyer's contractual ability to deduct indemnity claims directly from seller notes or earnout payments without court approval or independent review.
WHY IT MATTERS
Offset rights let the buyer deduct indemnity claims directly from the seller's deferred payments — seller notes, earnout installments, or other post-close consideration — without a separate collection process or independent review. The buyer identifies a rep breach, sends a notice, and reduces the next payment. In the Crossfield deal, this compounded with buyer-controlled EBITDA calculations on the earnout: two independent mechanisms, both controlled by the buyer, both reducing the same pool of founder money. Without a prohibition on unilateral offsets and a requirement for independent verification, offset rights turn every indemnity claim into an automatic purchase price reduction.