Sales incentives and setoff: using rebates to recover receivables by David H. Conaway

In assisting companies doing business with their customers and the supply chain, we have noted that companies increasingly propose to their customers incentives to purchase goods, often in the form of rebates and discounts.

There may be circumstances where setting off the obligation to pay such incentives owed to a customer against the customer’s accounts receivable owed by the customer is necessary to avoid or reduce risk. The need for this “remedy” is exacerbated during periods of financial and market uncertainty.