A Guide To Settlement Offers
What is a settlement offer?
A settlement offer is a proposal presented by one party to another engaged in an ongoing matter or dispute. The party making the offer outlines their terms and if these are accepted it will conclusively resolve the issue, preventing any further legal action.
It is always better to settle a dispute, it will be much quicker, more cost efficient and removes the uncertainty involved in going to trial. Even if the opposing party rejects the settlement offer, the offering party may gain a cost advantage during the trial.
An offer can take several forms, each having distinct consequences, as outlined below.
An ‘open offer’ can be proposed. This is an offer to settle that can be given to a judge if the matter goes to court. There is therefore a risk that the offer might be viewed as evidence of guilt/liability. For this reason, they are rarely used and more commonly the offer will be made without prejudice, as explained below.
A without prejudice offer typically takes the form of a written letter with the phrase WITHOUT PREJUDICE prominently marked at the top of the page. This statement helps to show the intention for the communication to retain legal privilege. This means that the offer made and the communication or statements contained within it can not be shown to a judge in court. This privilege will usually extend to any responses to the letter, whether this involves a counter offer, a request for further information or a straightforward rejection.
This wording must be used with care and can only be applied to offers and letters which do genuinely intend to settle a dispute. In a recent case (Jones v Tracey & Ors 2023) the courts considered the true nature of a letter, overlooking the without prejudice label used. It was decided that it was not intended to be without prejudice and therefore was admissible during the trial.
When used correctly, a without prejudice offer enables parties to negotiate openly and without the fear of their statements being used against them in future litigation. This approach is not frequently used as it does not impose any penalties on the declining party.
What is a Calderbank offer?
A Calderbank offer, also known as a without prejudice save as to costs offer, will also most commonly take the form of a written letter with the addition of the phrase WITHOUT PREJUDICE SAVE AS TO COSTS at the top. Similar to a without prejudice offer, when used correctly, both the offer and the corresponding communication cannot be referred to during the trial. However, the addition of SAVE AS TO COSTS signifies that the court can review and consider the offer at the end, when determining the allocation of costs.
If the offer is rejected and the case goes to court, if the judgment is less advantageous than the Calderbank offer, the party who rejected the offer could be required to pay a greater share of the legal costs. This cost implication can be enforced irrespective of the case’s final outcome. These consequences are at the court’s discretion and are subject to its judgment.
What is a Part 36 Offer?
A Part 36 Offer is similar to Calderbank Offer however; it follows specific Civil Procedure Rules (CPR). It has some advantages over the other types of offers and requires strict rules to be followed for it to be valid.
A Part 36 offer is made in writing and it will state that it intends to have the consequences of Part 36. In line with a Calderbank Offer, this offer will be made on a without prejudice save as to costs basis. This means that it will not be referred to during the trial, however, it will be made available in advance of any determination of costs.
If a claimant fails to beat the Part 36 offer in final judgment, as long as it was made at least 21 days before trial, the Part 36 offer will give the court powers to order the claimant pay an additional amount to the defendant. This can include some of the defendants’ legal costs with interest. Unlike a Calderbank offer, where the court can use their discretion, a Part 36 offer, has specific orders that the court must make depending on the circumstances (unless it considers it unjust to do so).
What is Without Prejudice Subject to Contract offer?
In circumstances where some significant details of the offer are still under consideration, a without prejudice subject to contract offer may be proposed. This will initiate a preliminary agreement in principle while the final negotiations continue. The settlement offer will then only become legally binding when all terms are agreed and formally documented.
As this is a without prejudice offer, it will remain inadmissible as evidence against either party during court proceedings should it be rejected.
How can JLN help?
If you are engaged in a dispute, it is important to seek advice as soon as possible regardless of whether you are a claimant or defendant. Our experienced litigation team can guide you through the best way to manage your dispute and will ensure the best possible chance to settle out of court.
To book an introductory call with one of our team, please send an initial email to email@example.com (with a brief description of the matter) and one of our team will liaise with you to fix a time to speak to one of our specialists.