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The misappropriation or Embezzlement of money.
Defalcation implies that funds have in some way been mishandled, particularly where an officer or agent has breached his or her fiduciary duty. It is commonly applied to public officers who fail to account for money received by them in their official capacity, or to officers of corporations who misappropriate company funds for their own private use.
Colloquially, the term is used to mean any type of bad faith, deceit, misconduct, or dishonesty.
v. from Latin for deduction, withholding or misappropriating funds held for another, particularly by a public official, or failing to make a proper accounting.
DEFALCATION, practice, contracts. The reduction of the claim of one of the
contracting parties against the other, by deducting from it a smaller claim
due from the former to the latter.
2. The law operates this reduction, in certain cases, for, if the parties die or are insolvent, the balance between them is the only claim; but if they are solvent and alive, the defendant may or may not defalcate at his choice. See Set off. For the etymology of this word, see Bracken. Law Misc. 186; 1 Rawle's R. 291; 3 Binn. R. 135.
3. Defalcation also signifies the act of a defaulter. The bankrupt act of August 19, 1841, (now repealed), declares that a person who owes debts which have been created in consequence of a defalcation as a public officer, or as executor, administrator, guardian or trustee, or while acting in any other fiduciary capacity, shall not have the benefit of that law.