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. If the offer is rejected and the rejecting party fails to obtain a more favorable verdict at trial, they may be required to pay the offering party's attorney fees and costs from the time the offer was made. An offer of judgment is essentially an admission of liability for a certain amount, while an offer of settlement is a proposal to resolve the dispute outside of court. In South Carolina, the rules regarding offers of judgment are governed by the South Carolina Rules of Civil Procedure, specifically Rule 68, which mirrors the federal rule to some extent. The rule encourages settlement by creating a financial disincentive for a party to reject a reasonable offer. If the offeree does not accept the offer and fails to achieve a better outcome at trial, they may be responsible for the offeror's post-offer costs.