What is a Part 36 offer?

Civil Procedure Rules (CPR) introduced in 1999 have an overriding objective of enabling the court to deal with cases justly and at proportionate cost.

As part of that aim parties are encouraged to settle disputes at all stages of a case - even before it comes to court. A Part 36 offer is one of the ways in which parties can reach an agreement. 

The offer can be made by the Claimant or Defendant in a dispute and at any stage before or after proceedings have commenced and in appeal proceedings

What are the rules?

An offer made "in accordance with Part 36" must be made in writing and it must be stated that it is made "pursuant to Part 36", and it must be genuine.

The offer may relate to the whole of the claim in dispute, or only part of it. The other party may have a counter claim and this may be taken into account in the offer to settle.

It must specify a period in which the receiving party is to accept the offer - this must not be less than 21 days.

The claim will be treated as inclusive of all interest until the date on which the relevant period for acceptance expires.

The costs and consequences that a party will face if it declines a reasonable offer to settle are also set out in the offer.

If either party requires clarification of the offer this must be requested within 7 days of the offer being made.

What are the advantages?

Part 36 offers are often used as there are tactical advantages in making a formal offer to settle in this format.

Because of the cost-penalty consequences Part 36 offers put pressure on the other party to settle, focussing his mind. They ensure both sides take negotiation seriously rather than rejecting all offers in order to get to trial.

If accepted Part 36 offers can avoid the time and potential irrecoverable costs associated with court proceedings.

Even if not accepted they may lead to a commercial settlement of a dispute

What happens once the offer is accepted?

A Part 36 offer to settle is accepted by serving written notice of the acceptance on the offeror.

This should be sent to the offeror's legal representative, and the notice filed with the court (when proceedings are underway).

Assuming the Claimant has accepted the offer within the period of time given for acceptance he is entitled to claim legal costs from the Defendant up until the date on which he accepted the offer. These costs should have been detailed and included within the offer.

The Defendant must pay the sum at a date not later than 14 days following the date of acceptance.

If the acceptance comes after the expiry of the relevant period the parties must agree the liability for costs. Failing this the Court will decide liability for costs.

The Claimant's costs will include those incurred in dealing with any counterclaim made by the Defendant.

Rejecting the offer

Either party may decide to reject a Part 36 offer and instead opt to take the matter to Court.

There are various possible outcomes, not least that the Court will award a lower figure than that of the Part 36 offer.

Where a Claimant's offer has been rejected by the Defendant and the claim is dismissed by the Court, the Claimant will be liable for the both his own and the Defendant's costs.

If a Claimant rejects a Defendant's offer and the Court award is equal to or lower than the part 36 offer, the Court may find the Claimant liable for costs incurred from the point at which the period for accepting the original offer expired until judgment.