Legal Definitions - statutory offer of settlement

A statutory offer of settlement is a formal, written proposal made by a defendant in a lawsuit to a plaintiff, offering a specific sum of money to resolve all claims and end the legal dispute before it goes to trial. This type of offer is governed by specific laws (statutes) in a particular jurisdiction, which dictate its timing, format, and, most importantly, the potential financial consequences for the plaintiff if they reject it.

The plaintiff typically has a limited timeframe to accept or reject the offer. If accepted, the settlement becomes legally binding and is filed with the court, concluding the case. However, if the plaintiff rejects the offer and the case proceeds to trial, they face a significant risk: if the final judgment awarded by the court is less favorable than the defendant's original statutory offer, the plaintiff may lose the ability to recover their own legal costs (such as filing fees, expert witness fees, and deposition costs) incurred after the offer was made. In some jurisdictions, the plaintiff might even be required to pay a portion of the defendant's legal costs from that point forward. This mechanism is designed to encourage plaintiffs to seriously consider reasonable settlement offers and avoid unnecessary trials.

• Example 1: Car Accident Lawsuit

  Sarah was injured in a car accident caused by David. She sues David for $75,000 to cover her medical bills, lost wages, and pain and suffering. David's attorney makes a statutory offer of settlement for $50,000.

  Sarah's attorney advises her that if she rejects the $50,000 offer and the case goes to trial, and the jury awards her only $40,000, she might not be able to recover the thousands of dollars in court costs she incurred after David made his offer. In some states, she might even have to pay some of David's costs. This forces Sarah to weigh the certainty of $50,000 against the uncertainty of a trial outcome and the potential for significant financial penalties.

• Example 2: Business Contract Dispute

  A small software company, "Tech Solutions," sued a client, "Global Corp," for $200,000, alleging breach of contract for unpaid services. Global Corp believes it only owes $100,000 and makes a statutory offer of settlement for $120,000 to Tech Solutions.

  Tech Solutions' leadership must carefully evaluate the $120,000 offer. If they decline it, go to trial, and the judge ultimately awards them only $110,000, they could be responsible for their own substantial litigation costs (like attorney fees, expert witness costs, and court fees) incurred after Global Corp's offer. This provision encourages Tech Solutions to consider whether the additional $80,000 they are seeking is worth the risk of recovering less and potentially paying their own costs.

• Example 3: Property Damage Claim

  John sued his neighbor, Lisa, for $15,000 to repair damage to his fence and landscaping, which he claims Lisa's contractors caused. Lisa, while disputing some of the damage, makes a statutory offer of settlement of $10,000 to John.

  John now faces a strategic decision. If he rejects Lisa's $10,000 offer and the case proceeds to trial, and the court only awards him $8,000, he would likely be barred from recovering his own court costs (e.g., filing fees, appraisal costs) that accumulated after Lisa made her offer. This legal tool puts pressure on John to realistically assess the strength of his claim and the potential costs of pursuing a trial for a relatively small difference.