Offers to settle a claim can be hugely important to both sides of a dispute. Get the offer right and it can avoid potentially long and costly legal proceedings. Our experts can help advise on how best to settle a claim.
What is an offer to settle?
An Offer to Settle can be made either before any legal proceedings (or even any alternate dispute resolution) is considered or commenced, or during such proceedings.
- an offer will usually be a proposal put forward by either side to the dispute to reach settlement by giving some form of concession in the hope a compromise can be agreed and further court involvement is avoided.
- the offer can be made by you or by your legal representative and can include legal costs or may focus solely on the claim itself (and legal costs will be added). These are often referred to as “Part 36 Offers” (see below).
Why make an offer to settle?
If neither side makes an offer nor backs down litigation may be inevitable. If an offer is made the receiving party can decide whether to accept it, reject it or there can often follow a period of negotiation.
If terms of settlement are ultimately agreed the parties will have closure and certainty. They will be able to get back on with their lives without the dispute hanging over them.
- for a Claimant making an offer, the discount to their claim value is offset by the absolute certainty and avoidance of risk, as well as the avoidance of a delay (subject to the offer being payable now) and the avoidance of having to pay their legal costs in the ongoing proceedings.
- if proceedings continued there is the risk that, even if you are successful, the Court will not award you all your legal costs and so this difference will further reduce the judgment sum.
- for a Defendant, whether they think the claim has merits or is completely ill-founded, the benefit of an agreement to settle will come at one point or another.
- if the offer is of an affordable amount, which enables them to get on with their life, then they may choose this route as oppose to the costs, risks and distraction of litigation.
The decision then becomes what to offer and when, rather than whether to make an offer at all.
When to make an offer to settle
Parties to a dispute might want to find out more about the other side’s position before they can assess their view on settlement. This might be by exchanging positions in correspondence or within proceedings, potentially following the exchange of evidence (which gives both a real understanding of how strong their evidence is and thus how likely both are to succeed).
- from the point of view of the person making the offer, there are real benefits in making an offer at the earliest possible opportunity.
- as a defendant any offer will be less expensive (as the claimant’s legal fees may still be quite low) and as a Claimant this will mitigate your ongoing liability to pay your legal costs (which may be quite expensive).
Ultimately an offer can be made at any point from when the dispute first arises right up until the steps of the court, just before the judgment is handed down. At the point an offer is accepted the parties have a settlement and no further court action should be necessary unless any enforcement steps are required.
Where you are defending a claim, and you have a strong defence that may not be quite apparent to the claimant yet, then you may decide to wait until you have presented your evidence before making an offer (as the offer may suddenly become more attractive at that point).
Part 36 offers to settle
There are certain types of offer that may be made pursuant to Part 36 of the Civil Procedure Rules 1998 (as amended). These are the Court rules which govern litigation.
Part 36 Offers are complex but are mainly focused on the risk of needless litigation and are intended to impose harsh penalties on anyone refusing a Part 36 Offer.
Benefits of an offer to settle
The main benefit of an offer to settle (dependant whether you are Claimant or Defendant) is the avoidance of costly legal proceedings.
In addition, where an offer is made, and then ongoing legal proceedings continue without any material improvement on this offer (i.e., where the claimant rejects the offer but does no better at Court after further lengthy and extensive proceedings) then in such circumstances the party who rejected the offer may (this is all in the discretion of the Court) must pay the other side’s legal costs from the date of the offer (even if they lost).
- for Part 36 Offers the costs risk is more mandatory – for a Claimant who has made a Part 36 Offer they additionally receive the benefits of further penalties under these rules including an increase on any judgments secured, a lower reduction on any of their costs assessed and interest on the judgment and their costs.
- the increase to the final amount awarded by the Court can be substantial.
From a Defendant’s point of view an early Part 36 Offer can assist in protecting you against the risk of litigation proceedings (although not wholly). It can change the line drawn for your position to improve from a complete defence of the claim (at the start) to only requiring a defence down to the limits of any offer to settle (where a Part 36 Offer is made).
In some cases, this can mean that a successful party is actually worse off after trial.
Offers to settle: an overview
Whilst Court proceedings and alternative dispute resolution procedures aim to resolve disputes and resolve claims one entity will have against another, he further a legal claim goes on, the more challenging things become – for example in terms of time, cost and personal stress.
You may be a Defendant with little assets, or with a weak defence. Or you may be a defendant with a strong defence, but either way you should consider whether the costs of legal proceedings are worth the risk of being wrong?
Similarly, you may be a claimant with what you consider is a strong claim, but you must consider, has the defendant really got the assets to satisfy any judgment obtained? Alternatively, is the risk of being wrong worth accepting less (which will also negate the associated legal costs of what could be a long and costly set of proceedings)?
In any of these and many other situations, making an Offer to Settle can solve many of the problems you might be facing, now or in the future.
At Francis Wilks & Jones whatever side of a dispute our client is on we will be looking to help settle the dispute on the most favourable terms possible. We give advice in relation to making and receiving offers and settlement tactics to achieve this.
We approached Francis Wilks & Jones following the termination of a large contract by a client on the basis of repudiation. The principal solicitor I dealt with was extremely responsive, assertive and able to redirect the problem against other company which agreed to reinstate the contract fully – with no loss of earnings – and even to pay a substantial sum towards my legal costs! I am very grateful for the assistance of FWJ.A happy company director