Two of the bodies of the US contractors were hung from a bridge in Fallujah [Video still - AP]

The US private security company formerly known as Blackwater has agreed to settle a wrongful death legal case with the families of four of its contractors killed in a gruesome 2004 ambush that was a defining moment of the Iraq war for the American public.

The families reached a confidential settlement with Academi, as Blackwater is now known, agreeing to the dismissal of their case before the US Court of Appeals for the Fourth Circuit based in Richmond, Virginia.

An administrator for the estates of the four dead contractors sued Blackwater in 2005 after they were beaten, burned and executed by Iraqi fighters while escorting a supply convoy in Fallujah.

Two of the charred bodies were strung from a bridge over the Euphrates River.

Images of the events disturbed many Americans at one of the low points for the US during the Iraqi occupation.

Blackwater, which changed its name to Xe Services and then to Academi, came to symbolise the US policy of hiring private contractors to perform work previously handled by the military.

The legal case accused the company of sending the contractors into a high-risk environment without armoured vehicles, automatic weapons and the required number of personnel.

A federal judge in North Carolina dismissed the case in January 2011, after court-ordered arbitration efforts failed.

The administrator of the dead contractors' estates appealed to the Fourth Circuit to revive it.
 
Details of the settlement were not immediately available. John Procter, a spokesman for the company, declined to comment, under the terms of the agreement.

Lawyers for the administrator also did not respond to requests for comment.