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).

In New Jersey, the offer of judgment rule is governed by Rule 4:58 of the New Jersey Rules of Court. This rule allows a defendant to make an offer of judgment to the plaintiff, or a plaintiff to make an offer to a defendant in a civil case. If the offer is not accepted and the final judgment is at least 120% of the offer (or less than 80% of the offer if made by a plaintiff), the party who rejected the offer may be ordered to pay the offering party's litigation expenses, including attorney's fees, incurred after the offer was made. This rule is designed to encourage settlement and avoid unnecessary litigation. It is important to note that the specifics of the rule, including the timing for making such offers and the consequences of not beating the offer at trial, should be carefully reviewed with an attorney to understand the potential risks and benefits of making or rejecting an offer of judgment in New Jersey.