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MUTUALCREDITS Definition & Legal Meaning

Definition & Citations:

In bankrupt law. Credits which must, from their nature, terminate in debts; as where a debt is due from one party, and credit given by him to the other for a sum of money payable at a future day and which will then become a debt; or where there is a debt on one side, and a delivery of property with directions to turn it into money on the other. 8 Taunt. 499; 2 Smith. Lead. Cas. 179. By this phrase, in the rule under which courts of equity allow set-off in cases of mutual credit, we are to understand a knowledge on both sides of an existing debt due to one party, and a credit by the other parts’, founded on and trusting to such debt, as a means of discharging it. King v. King, 9 ,N. J. Eq. 44. Credits given by two persons mutually; i. e., each giving credit to the other. It is a more extensive phrase than “mutual debts.” Thus, the sum credited by one may be due at once, that by the other payable in future*; yet the credits are mutual though the transaction would not come within the meaning of “mutual debts.” 1 Atk. 230; Atkinson v. Elliott, 7 Term R. 378

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