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,' which is an offer to allow a judgment against them for a specified amount. Similarly, either party in a case can make an 'offer of settlement,' which is a proposal to resolve the dispute outside of court. If the opposing party rejects the offer and fails to obtain a more favorable outcome at trial, they may be required to pay the offering party's attorney fees and costs from the time after the offer was made. In Michigan, the state's equivalent procedure is governed by Michigan Court Rules (MCR 2.405). This rule allows a party to make an offer of judgment, and if the opposing party rejects the offer and does not achieve a verdict that is at least 10% more favorable than the offer, they may be responsible for the offering party's costs. The purpose of these rules is to encourage settlement and avoid unnecessary litigation.