A Part 36 offer is a formal settlement offer made under Part 36 of the Civil Procedure Rules in England and Wales. It is designed to encourage parties to settle disputes without going to trial by providing a clear framework for making and responding to offers. Here’s a detailed look at what a Part 36 offer entails:

Key Features of a Part 36 Offer

  1. Formal Written Offer:
    • A Part 36 offer must be made in writing and clearly state that it is intended to be a Part 36 offer.
    • It must specify a period of not less than 21 days within which the offer can be accepted (the “relevant period”).
    • During this period, the offeree can accept the offer without needing the court’s permission.
  2. Financial Incentives and Penalties:
    • For Claimants: If a claimant makes a Part 36 offer that the defendant does not accept, and the claimant then achieves a better result at trial, the court may impose additional costs on the defendant. This could include paying the claimant’s costs on an indemnity basis, interest on those costs, and an additional sum of up to £75,000.
    • For Defendants: If a defendant makes a Part 36 offer that the claimant does not accept, and the claimant fails to achieve a better outcome at trial, the claimant may be liable for the defendant’s costs from the end of the relevant period, along with interest on those costs.
  3. Flexibility:
    • Part 36 offers can be made at any stage of the litigation process, including before proceedings are issued.
    • They can cover the whole claim or part of it, including specific issues.
  4. Impact on Costs:
    • The primary function of a Part 36 offer is to shift the costs burden. The rules incentivize both parties to seriously consider the offer to avoid potential adverse costs orders.
  5. Acceptance:
    • If a Part 36 offer is accepted within the relevant period, the claimant is entitled to their costs up to the date of acceptance.
    • If accepted after the relevant period, the parties need to agree on the costs or have them determined by the court.

Strategic Use of Part 36 Offers

  • Encouraging Settlement: The prospect of facing additional costs if a Part 36 offer is not accepted encourages parties to settle disputes early, saving time and resources.
  • Pressuring the Opponent: Making a reasonable Part 36 offer can put pressure on the opposing party to settle or risk unfavourable financial consequences.
  • Managing Risk: Both claimants and defendants can use Part 36 offers to manage litigation risks and potential costs exposure.

Practical Example

Imagine a claimant in a litigation case makes a Part 36 offer to settle for £50,000. If the defendant rejects this offer and the case goes to trial, and the court awards the claimant £55,000, the defendant may have to pay additional costs and interest because the claimant achieved a better result than the offer. Conversely, if the court awards only £45,000, the claimant may have to pay the defendant’s costs from the end of the relevant period.

Conclusion

A Part 36 offer is a strategic tool in the litigation process that encourages early settlement and helps manage legal costs. Understanding how to make and respond to Part 36 offers effectively can significantly impact the outcome of a case. If you think we may be able to assist you, please do not hesitate to contact us the Dispute Resolution team who would be best placed to assist you throughout the process. Please call our offices today on 01702 338338/0208 049 5888 to speak with a member of our specialist Dispute Resolution team. We are able to accommodate appointments in our Westcliff, Billericay, Benfleet, Liverpool Street and Stratford offices.