In federal court—under Rule 68 of the Federal Rules of Civil Procedure—and in many states, there is an offer of judgment or offer of settlement procedure in which a party defending against a claim (defendant) may make an offer of judgment, or either party may make an offer of settlement.

If the party that receives the offer rejects it and does not win a better result at trial, the party who rejected the offer may be required to pay the offering party’s attorney fees and costs incurred after the offer was made.

An offer of judgment is an offer to allow a judgment to be taken against the party offering the judgment. An offer of judgment admits to liability and damages for a specific amount. An offer of settlement is similar but is in the form of an agreement or contract for settlement rather than a judgment from the court for the offered amount.

Laws vary from state to state and a state’s offer of judgment or offer of settlement procedure is usually located in its rules of civil procedure of code of civil procedure (statutes).

Under Rule 68 of the Federal Rules of Civil Procedure, a defendant in a federal court case can make an offer of judgment, and either party can make an offer of settlement. This rule is designed to encourage settlement by imposing potential costs on a party who refuses a reasonable offer and then fails to obtain a more favorable judgment at trial. Specifically, if the offeree rejects the offer and the final judgment is not more favorable than the offer, they may be required to pay the costs incurred by the offeror after the offer was made, including attorney's fees. In Maine, the procedure for offers of settlement is governed by Maine Rule of Civil Procedure 68, which mirrors the federal rule in many respects. It allows a defendant to make a formal offer to settle the claim for a specified sum, and if the plaintiff rejects the offer and fails to obtain a more favorable judgment, the plaintiff may have to pay the defendant's post-offer costs. However, Maine's rule does not automatically include attorney's fees as part of the costs, unless the underlying statute in the case includes a fee-shifting provision. It's important for parties in Maine to understand the implications of Rule 68 when considering settlement offers.