diff --git a/gamedir/Data-1.13/Ja2_Options.INI b/gamedir/Data-1.13/Ja2_Options.INI
index b942ecd9a..61f4710da 100644
--- a/gamedir/Data-1.13/Ja2_Options.INI
+++ b/gamedir/Data-1.13/Ja2_Options.INI
@@ -2236,6 +2236,18 @@ NEW_RANDOM = TRUE
 ;******************************************************************************************************************************
 ;******************************************************************************************************************************
 
+;------------------------------------------------------------------------------------------------------------------------------
+; Determine when the lost battle is considered defeat 
+; (which results in MORALE_HEARD_BATTLE_LOST and GLOBAL_LOYALTY_BATTLE_LOST penalties, also playing MUSIC_TACTICAL_DEATH and 
+; writing defeat record in the game log)
+; 0: default, any lost battle is considered defeat
+; 1: if enemy team was alerted
+; 2: if at least one of retreating mercs is not covert
+; 3: if at least one merc was killed in battle
+; 4: if all mercs were killed in battle
+;------------------------------------------------------------------------------------------------------------------------------
+DEFEAT_MODE = 0
+
 [Tactical Enemy Role Settings]
 
 ;******************************************************************************************************************************
diff --git a/gamedir/Data/Ja2_Options.INI b/gamedir/Data/Ja2_Options.INI
index 9e890d4cd..da4e8a99a 100644
--- a/gamedir/Data/Ja2_Options.INI
+++ b/gamedir/Data/Ja2_Options.INI
@@ -2212,6 +2212,18 @@ ENEMY_JAMS = FALSE
 ;******************************************************************************************************************************
 ;******************************************************************************************************************************
 
+;------------------------------------------------------------------------------------------------------------------------------
+; Determine when the lost battle is considered defeat 
+; (which results in MORALE_HEARD_BATTLE_LOST and GLOBAL_LOYALTY_BATTLE_LOST penalties, also playing MUSIC_TACTICAL_DEATH and 
+; writing defeat record in the game log)
+; 0: default, any lost battle is considered defeat
+; 1: if enemy team was alerted
+; 2: if at least one of retreating mercs is not covert
+; 3: if at least one merc was killed in battle
+; 4: if all mercs were killed in battle
+;------------------------------------------------------------------------------------------------------------------------------
+DEFEAT_MODE = 0
+
 [Tactical Enemy Role Settings]
 
 ;******************************************************************************************************************************