Legal Definitions - offer of settlement

An offer of settlement is a formal proposal made by one party in a legal dispute to another, suggesting specific terms to resolve the disagreement outside of a full trial or continued litigation. It is an attempt to reach a mutually acceptable resolution, often involving a payment, an agreement to perform or refrain from an action, or a combination of these, in exchange for the other party dropping their legal claims. The primary goal is to avoid the time, expense, and uncertainty associated with a court case.

Here are some examples illustrating an offer of settlement:

• Example 1: Personal Injury Claim

  After a slip-and-fall accident at a grocery store, a customer sustains an injury and incurs medical expenses. The customer's lawyer sends a letter to the grocery store's insurance company, proposing that the store pay $50,000 to cover medical bills, lost wages, and pain and suffering. In return, the customer would agree to release the grocery store from any further liability related to the incident and drop any potential lawsuit.

  This illustrates an offer of settlement because the customer, through their lawyer, is proposing a specific financial amount and terms (releasing liability) to resolve the dispute without going to court. It's an attempt to compromise and avoid the costs and risks of litigation.

• Example 2: Contract Dispute Between Businesses

  A software development company was hired by a client to build a custom application, but the project fell significantly behind schedule and over budget. The client threatens to sue for breach of contract. To avoid litigation, the software company sends a formal proposal offering to complete the remaining work at no additional cost, provide a 20% discount on future services, and refund 15% of the payments already made, provided the client agrees to drop all claims and sign a mutual release.

  This is an offer of settlement because the software company is presenting a set of actions (completing work, discounts, refund) and conditions (dropping claims, mutual release) to resolve the contractual dispute and prevent a lawsuit. It's a strategic move to find common ground and avoid the expense and disruption of court proceedings.

• Example 3: Employment Discrimination Case

  An employee files a complaint with a government agency, alleging discrimination by their employer. Before the agency completes its investigation or a lawsuit is filed, the employer's legal counsel sends a letter to the employee's attorney. The letter proposes a severance package equivalent to six months' salary, continuation of health benefits for three months, and a neutral letter of recommendation, in exchange for the employee withdrawing their complaint and agreeing not to sue the company for discrimination.

  This demonstrates an offer of settlement as the employer is proactively putting forward specific benefits (severance, benefits, recommendation) with the condition that the employee forgo their legal claims. This is a common tactic to resolve disputes privately, avoid negative publicity, and prevent potentially costly and lengthy litigation.