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When there is a falling out, it is always worth trying to work it out.

But what if the other party doesn’t want to?

Court proceedings may be the next option. But even then, there are steps you can take to make the other party reconsider their position.

One useful device is an ‘Offer to Settle’. If the offer is structured properly and complies with the court rules, it can provide some costs protection if you have to start proceedings.

Take this example.

You have a business dispute and are claiming a sum of money. In the spirit of compromise you are prepared to accept a lesser amount. The other party is not prepared to enter into any settlement discussions. Before starting proceedings, you make a written offer to settle for the reduced amount which complies with Part 36 of the Civil Procedure Rules. If the other party accepts your offer within 21 days, it will have to pay your costs up to the date of acceptance.

But the other party does nothing. Provided you do not withdraw your offer, it can give you some cost protection if the case goes to trial. The judge is only informed of the offer once judgment has been given. If you win and are awarded a sum which is the same as or more than your offer, the court will take the offer into account when deciding costs. You can usually expect to be awarded:

  • interest at up to 10% above base rate;
  • a higher costs recovery;
  • interest on those costs, again at up to 10% above base rate; and
  • an additional amount. For claims up to £500,000, this amount is 10% of the sum claimed.

Both the higher interest rate and costs recovery will apply to some or all of the period after your offer could have been accepted (usually 21 days). A defendant should think carefully before ignoring a Part 36 offer. Defendants too can make use of these offers, but with slightly different consequences.

The other party may not want to settle, but with careful planning you can strengthen your position if you have to issue proceedings. Offering to settle has clear advantages.

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.