When people think about civil disputes, they often picture a case running all the way to trial. In reality, most claims settle before they reach a final hearing. The court system encourages parties to resolve disputes early wherever possible, both to save time and to limit costs. One of the most important tools for doing that in England and Wales is the Part 36 offer.
A Part 36 offer is a formal settlement offer made under Part 36 of the Civil Procedure Rules. Its purpose is to encourage realistic negotiation. It does this by attaching clear cost consequences if an offer is not accepted and the final court decision ends up being less favourable to the party who refused it.
In this article, we explain what a Part 36 offer is, how it works and why it can have such a significant impact on the outcome of a case.
What a Part 36 offer is
A Part 36 offer is a written offer to settle a civil claim on specific terms, made in accordance with strict rules. Either side can make one. A claimant can offer to accept a certain amount to settle their claim and a defendant can offer to pay a certain amount to bring the dispute to an end.
Part 36 offers can be made at almost any stage. They can be served before court proceedings start, during the claim or even close to trial. The key is that they must follow the formal Part 36 procedure. If they do, they trigger special cost rules that do not apply to informal offers.
Most Part 36 offers are made on a without prejudice save as to costs basis. That means the judge deciding the case will not see the offer while deciding who is right or wrong. The offer is only revealed after judgment, when the court deals with costs.
What makes a Part 36 offer valid
To count as a Part 36 offer, the offer must meet certain requirements. These rules exist because Part 36 offers carry serious cost consequences so they must be clear and fair.
A valid offer must be in writing and must state that it is intended to have the consequences of Part 36. It must also specify a relevant period for acceptance. In most cases this period must be at least twenty one days. During that time, the other party can accept the offer and settle the claim on those terms.
The offer must also make clear whether it relates to the whole claim or only part of it. For example, a defendant may make an offer that settles the financial claim but leaves another issue for determination. If the offer is unclear or does not follow the rules, it may not be treated as a Part 36 offer, which means the cost protections may not apply.
How Part 36 offers work in practice
Once a Part 36 offer is served, the other party decides whether to accept or reject it. If it is accepted within the relevant period, the case settles on those terms. In most situations, the party accepting the offer is also responsible for paying the other side’s costs up to the date of acceptance, unless the parties agree to a different arrangement.
If the offer is not accepted within that period, it can still be accepted later unless the offer is withdrawn or changed. However, accepting late has different cost consequences, which can be significant.
If the offer is not accepted at all and the case proceeds to trial, the court will compare the final judgment with the offer. That comparison decides whether the rejecting party faces cost penalties.
Costs consequences if an offer is accepted late
If a Part 36 offer is accepted after the relevant period has expired, the case still settles, but the cost position can change. The general rule is that the party accepting late will have to pay the other side’s costs from the end of the relevant period to the date of acceptance.
This rule exists to encourage parties to accept sensible offers quickly rather than waiting to see how the case develops. The court can depart from the rule if it would be unjust, but that is not the usual outcome. This is why timing matters as much as the figure offered.
What happens if the offer is not accepted and the case goes to trial
The real power of a Part 36 offer lies in what happens if it is rejected and the claim proceeds to judgment. After the court has decided the case, it will look back at any Part 36 offers and compare them to the final result.
If a claimant makes a Part 36 offer and then wins at trial with a result that is at least as good as what they offered, the court can award significant benefits to the claimant. These can include extra interest on damages, interest on costs and in some cases an additional financial uplift on top of the damages. The claimant may also be awarded costs on a more generous basis from the end of the relevant period.
This is designed to reward a party who made a reasonable settlement attempt and was then proven right at trial.
If a defendant makes a Part 36 offer and the claimant fails to obtain a judgment that beats it, the consequences can be serious for the claimant. The claimant may have to pay the defendant’s legal costs from the end of the relevant period onwards. In real terms, that can mean the claimant wins the case but still ends up worse off financially because they did not accept a sensible offer.
The court has a discretion to avoid these consequences if it would be unjust, but the starting point is that the cost penalties apply.
Why Part 36 offers are used strategically
Because the rules on costs are so strong, Part 36 offers are often used as a tactical tool. A well judged offer can put real pressure on the other side to settle, because the risks of refusing it are clear.
For claimants, a Part 36 offer can increase the chances of a reasonable settlement and protect against cost arguments later. For defendants, it can be a way to cap exposure and shift financial risk onto the claimant if they continue the claim unnecessarily.
The best offers are those that reflect a realistic view of the case. If an offer is pitched too high or too low, it may be ignored and it may not achieve the intended pressure.
Common pitfalls to avoid
Part 36 offers are powerful, but mistakes can reduce or even remove their effect. A common problem is making an offer that does not comply with the formal rules. If the relevant period is missing if the offer is unclear or if it is not stated to be under Part 36, the court may not treat it as a Part 36 offer at all.
Another pitfall is misjudging value. If you make an offer without a proper understanding of the likely court outcome, you may put yourself at risk instead of protecting your position.
Finally, parties sometimes misunderstand what it means to beat an offer. The comparison is usually based on the final judgment, including interest where relevant and this can be more complex than it looks at first glance. Legal advice can be important in working out the real risk.
Why legal advice is vital
If you receive a Part 36 offer, it is important to understand the consequences before responding. Accepting too quickly may mean settling for less than you could reasonably achieve. Refusing without proper analysis may expose you to heavy cost penalties later.
If you are thinking about making a Part 36 offer, advice can help you choose the right timing and value and ensure the offer is drafted correctly. This is especially important in cases involving complex evidence, uncertain valuation or multiple parties.
Finding a sensible route to settlement
Part 36 offers are designed to nudge disputes toward early settlement by making the cost risks of refusing a reasonable offer very clear. Used well, they can save time, reduce stress and bring clarity to negotiations. Used poorly, they can create financial risk.
If you are involved in a civil dispute and want to understand whether a Part 36 offer could help your case, getting early advice from experienced dispute resolution solicitors can make a real difference.
Get expert advice on your case
Please note that this article is solely for informational purposes. It’s not a substitute for legal advice. We encourage readers to contact Osbourne Pinner for case-specific guidance.
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