Legal Definitions - offer of judgment

An offer of judgment is a formal proposal made by one party in a lawsuit to the opposing party, suggesting a specific amount or outcome for which the case can be settled. Essentially, the offering party agrees to allow a judgment to be entered against them for a defined sum or resolution, aiming to conclude the litigation without a full trial.

The significant aspect of an offer of judgment, particularly in federal courts and many state jurisdictions, is the potential financial consequence if it is rejected. If the party who receives and rejects the offer later proceeds to trial and obtains a judgment that is not more favorable than the original offer, that party may be required to pay the court costs (such as filing fees, expert witness fees, and other litigation expenses) incurred by the offering party *after* the offer was made. This rule encourages parties to seriously consider reasonable settlement proposals and can penalize those who continue litigation unnecessarily.

Here are some examples to illustrate how an offer of judgment works:

• Example 1: Personal Injury Lawsuit

  Imagine a scenario where Ms. Chen sues Mr. Davies for $150,000 after a car accident, claiming medical expenses and lost wages. Mr. Davies believes he is only partially at fault and, wanting to avoid a lengthy trial, makes an offer of judgment for $60,000. This means Mr. Davies is formally proposing to let a court judgment of $60,000 be entered against him to settle the case.

  How it illustrates the term: If Ms. Chen rejects this offer and the case goes to trial, and the jury ultimately awards her only $45,000 (which is less favorable than the $60,000 offer), then Ms. Chen might be responsible for paying Mr. Davies' court costs that accumulated after he made the $60,000 offer. This rule incentivizes Ms. Chen to seriously evaluate the $60,000 settlement proposal.

• Example 2: Business Contract Dispute

  Consider "Apex Innovations," a software development company, suing "Global Marketing Solutions" for $200,000, alleging a breach of contract for an unfinished project. Global Marketing Solutions disputes the full amount, claiming Apex Innovations failed to provide necessary information. To resolve the dispute without further litigation, Global Marketing Solutions makes an offer of judgment for $75,000.

  How it illustrates the term: Global Marketing Solutions is formally stating its willingness to have a judgment of $75,000 entered against it to conclude the lawsuit. If Apex Innovations rejects this offer and proceeds to trial, and the court ultimately awards them only $50,000 (less favorable than the $75,000 offer), then Apex Innovations could be responsible for Global Marketing Solutions' court costs incurred after the offer was made. This encourages Apex Innovations to consider settling for $75,000 rather than risking a less favorable outcome and paying additional costs.

• Example 3: Property Damage Claim

  A homeowner, Mr. Rodriguez, sues "Reliable Roofing Co." for $30,000, claiming faulty roof installation led to water damage. Reliable Roofing Co., while disputing the extent of the damage, makes an offer of judgment for $10,000 to cover repairs and avoid the expense and uncertainty of a trial.

  How it illustrates the term: Reliable Roofing Co. is formally proposing to settle the case by allowing a judgment of $10,000 to be entered against them. If Mr. Rodriguez rejects this offer and the case goes to trial, and the jury awards him only $8,000 (less favorable than the $10,000 offer), then Mr. Rodriguez might be required to pay Reliable Roofing Co.'s court costs that accumulated after the $10,000 offer was made. This mechanism encourages Mr. Rodriguez to weigh the certainty of $10,000 against the risk of a lower award and additional costs.