Q: Has Revised Article 9 changed the right to setoff? All of our loan documents state we have the right to setoff against deposit accounts in the event of default and on several occasions, we have used funds in a checking account to offset payment(s) due.

A: The revisions to Article 9 do not change the basic principle of setoff, which is a contractual matter between the parties. The right to setoff is generally set out in the note form and/or in the signature card or deposit agreement (by the way, we think it may be a good idea to have the note and the signature card authorizing setoff). North Dakota has a specific statute covering the right of a bank to apply money on deposit to the payment of a debt of the depositor to the bank. N.D.C.C. § 6-03-67 provides: N.D.C.C. § 6-03-67 (emphasis added). If your institution has proper consent for setoff in the signature card or note, it is entirely within its rights to setoff the funds in question. Having said all of this, there may be a situation when your right to setoff will not have priority regarding the account over another secured party. The exercise by a bank of a set-off against a deposit account is ineffective against a secured party that holds a security interest in the deposit account which is perfected by control under N.D.C.C. 41-09-04, if the set-off is based on a claim against the debtor. Of course, you would be aware of the superior interest if another party was perfected by control.