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When you fall into a commercial dispute, you can consider making a court claim through court proceedings to potentially resolve your disagreement with the opposing party. If you decide to do this, you should seek legal advice from a legal representative. However, court should be the last resort to resolve a commercial dispute. A new claim can be costly and time-consuming and can damage reputations and business relationships.
If you are nearing the court stage of a business dispute, you may wish to consider a Part 36 Offer as a settlement offer to try to avoid court proceedings. This early offer could be from either a claimant or a defendant and will have costs consequences decided by a trial judge, such as paying the defendant’s costs or the claimant’s costs for any civil litigation. This article will explain Part 36 Offers as legal strategies for settlement.
What is a Part 36 Offer?
Part 36 Offers are in the Civil Procedure Rules. They allow parties to a commercial dispute to make an offer to settle it. However, when parties make this offer, there is no need for any court involvement, so no court proceedings. Additionally, Part 36 offers encourage parties to settle disputes. When one party makes this offer, it puts the other party under pressure to accept.
When and How Might I Make a Part 36 Offer?
There are legal rules about how to make a Part 36 Offer. For example, a Part 36 Offer applies to large claims in commercial disputes worth at least £10,000. You can make a Part 36 Offer before issuing court proceedings for your commercial dispute. You can make the Part 36 Offer for the whole claim or just a part of it.
Firstly, you must make a Part 36 Offer in writing, and it must include:
- what the offer is;
- if the offer is for money owed, it must be a whole payment rather than a partial payment;
- an explicit statement that it is made under Part 36 of the Civil Procedure Rules (CPR);
- whether it settles the whole or part of the claim;
- whether it includes any counterclaim; and
- what the consequences of the claim are.
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Accepting or Rejecting a Part 36 Offer
A Part 36 Offer will remain for at least 21 days for the other party to consider accepting or rejecting it. This is the ‘relevant period’. There are specific implications associated with accepting or rejecting the offer.
If a party accepts a Part 36 Offer within 21 days, they will pay the other party’s legal costs up to the date of acceptance and a settlement sum. They must pay this within 14 days of accepting the offer. If a party accepts an offer after 21 days, it is up to the parties to decide who will be liable for the costs. If they cannot decide, a court will make a costs order. The court will likely order the accepting party to pay the other party’s legal costs up until the date they accept the offer.
The court can penalise a party for rejecting a realistic Part 36 Offer if the case then goes to trial. For example, if a party made an offer that the other rejected but received a higher award through court litigation, the party that made the offer would typically have to pay the other party’s costs. However, if a party rejects the Part 36 Offer and later receives an award less than the offer, they will usually pay the costs for the party who initially made the offer.
Can I Vary or Withdraw a Part 36 Offer?
It is possible to withdraw or vary a Part 36 offer after the 21 days have expired, provided the other party has not yet accepted it. You may wish to do this to make the offer less favourable to the other party, and a court does not need to permit you.
However, if you wish to vary or withdraw the Part 36 Offer before the 21 days, you must serve notice of withdrawal or variation. When you serve this on the other party, the relevant period will change, provided they do not accept the offer while you do this. If they do accept it, the withdrawal or variation cannot take effect unless a court allows it to. You will need to apply to a court within seven days to request this.
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Key Takeaways
If you are considering court proceedings to resolve your commercial dispute, you may want to make a Part 36 Offer instead. You can do this if your claim is over £10,000. A Part 36 Offer allows you to propose a resolution to the other party without involving the court.
There are legal rules for making a Part 36 Offer. It must be in writing and include details of the consequences. When you make a Part 36 Offer, the other party usually has 21 days to accept or reject it. This is the relevant period. Financial consequences depend on whether the offer is accepted or rejected and the outcome of any later court proceedings.
You can vary or withdraw your Part 36 Offer after the relevant period has expired. However, if you want to do so beforehand, there are procedures you need to follow.
If you need help understanding Part 36 Offers as legal strategies for settlement in the UK, our experienced disputes lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. So call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A Part 36 Offer is a settlement offer in a commercial dispute made under the Civil Procedure Rules to encourage parties to settle without court involvement.
The other party has 21 days to consider accepting or rejecting a Part 36 Offer, known as the ‘relevant period’.
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