The deal was signed on Friday by Abdu Salam, director of the al-Qadhafi Foundation, a charity that negotiated for Tripoli, Guillaume Denoix de Saint-Marc, a spokesman for some of the families, Francis Szpiner, attorney for the French victims' rights group SOS Attentats, and a representative of the Caisse des Depots et Consignations, a state-owned financial agency.
Seventeen people representing the families of 11 French and African victims of the bombing attended the signing, which took place in a Parisian law office.
Denoix de Saint-Marc said shortly before the signing that Libya would pay $1 million to the families of each of the 170 victims of the 1989 bombing.
The official from the Caisse des Depots et Consignations certified on Friday a check for $42.5 million, the first of four payments to be made by Libya to the families for a total of $170 million.
A DC-10 belonging to the French airline UTA went down over the west African state of Niger in September 1989, killing 170 people, including 54 French nationals.