When it comes to resolving disputes, there are various ways in which parties can attempt to reach a solution without the dispute proceeding to trial. One way to resolve a dispute is for a party to offer to settle the dispute. A Calderbank offer is one type of settlement offer and in this article, we’ll discuss how they work in practice and also cover some of the most common questions our business disputes solicitors come across in relation to them.
Contents:
- What is a Calderbank offer?
- What’s the difference between a Part 36 offer and a Calderbank offer?
- What are the advantages of making a Calderbank offer?
- What are the costs consequences of a Calderbank offer?
- When is a Calderbank offer used?
- What should a Calderbank offer include and how do you make one?
- Are Calderbank offers time limited?
- Is a Calderbank offer legally binding?
- How to respond to a Calderbank offer
- Can you withdraw or modify a Calderbank offer?
- Can you negotiate a Calderbank offer?
- What happens if a Calderbank offer is accepted?
- What happens if a Calderbank offer is rejected or ignored?
- Summary
What is a Calderbank offer?
A Calderbank offer is a settlement offer written as 'without prejudice save as to costs.' This means that if you make a Calderbank offer and it’s not accepted by the other party, it can’t be referred to during the course of the legal proceedings relating to the claim itself, but it can be referred to the court on the question of costs at the end of the proceedings.
What’s the difference between a Part 36 offer and a Calderbank offer?
Calderbank offers aren’t controlled by the same strict set of rules as Part 36 offers. This means there is more flexibility in terms of making the offer itself in the form of time limits for acceptance, payment and payment terms, for example. Unlike a Part 36 offer, a Calderbank offer is usually made as inclusive of costs.
Another important thing to note is that the usual rules of contract law apply to Calderbank offers, whereas they don’t when it comes to Part 36 offers.
What are the advantages of making a Calderbank offer?
Calderbank offers as a way of settling a dispute provide some flexibility: you can set a time limit of your choosing for acceptance of the offer, you can withdraw it at any stage and you’re free to decide what payment terms you’d like to insist on. This is useful for a party who wants to settle a claim but doesn’t want to trigger the more onerous cost consequences attached to making a Part 36 offer.
Another positive feature of Calderbank offers is that they can be used in litigation on the small claims track and in arbitration proceedings – both circumstances in which Part 36 isn’t directly applicable.
What are the costs consequences of a Calderbank offer?
Unlike in situations where a Part 36 offer has been made, there are no automatic costs consequences or sanctions that the court will apply if the losing party has failed to accept the offer at an earlier stage in the proceedings. Although a Calderbank offer that hasn’t been accepted may be an important consideration for the court when it comes to assessing costs in accordance with the Civil Procedure Rules (CPR), the court can ultimately decide what weight to give it by applying its discretion.
When is a Calderbank offer used?
A Calderbank offer can potentially be made by either party to a dispute as an intended means of reaching a settlement before a matter reaches trial, potentially saving both parties considerable time and money. It might also be a good tactical step to make a Calderbank offer if you consider that the claim or counterclaim against you is fairly weak and you want to make a low settlement offer without risking liability for the Part 36 cost consequences if it isn’t accepted.
What should a Calderbank offer include and how do you make one?
A Calderbank offer should always be made in writing and there are a few key points to include:
- It should state that the offer is a Calderbank offer and is made ‘without prejudice save as to costs’.
- The terms of the offer should be clear and precise, and drafted in such a way that the other party is able to accept it.
- A reasonable timeframe in which the other party can accept the offer ought to be given – if you’ve decided to add a time limit to it.
- You should give reasons as to why the offer should be accepted, and make it obvious that if the offer is rejected, you intend to bring the offer to the court’s attention when they’re making a decision about costs later down the line.
- Once you’ve put together your offer, it should be sent by your lawyer to the other party’s legal representative if they’ve instructed a lawyer, or directly to them if they haven’t.
Are Calderbank offers time limited?
A Calderbank offer may be time-limited (that is, it may state the date from which it is no longer open for acceptance) or it may be left as open-ended. If you decide that an open-ended offer is the best option, it’s important to keep it under review so that if circumstances change and your offer appears to be too generous to the other party at a later point, you’re ready to withdraw it promptly.
Is a Calderbank offer legally binding?
Because Calderbank offers are ruled by the contractual principles of offer and acceptance, once accepted, the Calderbank letter and offer create a legally binding contract between the parties. This means that the offer must be sufficiently clear to create a binding contract.
How to respond to a Calderbank offer
The first thing to do if you receive a Calderbank offer is to think carefully about whether or not you want to accept it, and it’s a good idea to take legal advice on the offer as soon as possible. You should think about whether the amount offered seems reasonable and weigh up your chances of success based on the merits of your case if you decide to reject it and proceed to a trial, where a judge will make an overall decision.
Whether or not you decide to accept the Calderbank offer, your response should be in writing and should clearly communicate to the offeror whether you accept or reject it.
Can you withdraw or modify a Calderbank offer?
Withdrawal of a Calderbank offer
You can withdraw a Calderbank offer at any time before it’s accepted by the other party. Once it has been withdrawn or rejected, it’s no longer valid.
Modification of a Calderbank offer
Due to the fact that the principles of contract law apply to Calderbank offers, it’s likely that any modification would be classed as a second offer and then have the effect of withdrawing the initial offer. It’s definitely worth obtaining legal advice in this situation to avoid any potential pitfalls of making any changes once the first offer has been sent to the other party.
Can you negotiate a Calderbank offer?
A Calderbank offer can certainly be used to encourage negotiation and it’s often used in this way, but it’s worth highlighting that when it comes to the offer itself, The High Court has previously ruled that a valid Calderbank offer had to be acceptable on its stated terms and should not be one which contemplated further negotiation.
What happens if a Calderbank offer is accepted?
If a Calderbank offer is accepted, acceptance must be communicated in writing and the effect of this is that the dispute will be settled on the terms set out in the offer and then formalised. It’s important to point out again too that a legally binding contract is created in the act of accepting, so you need to bear this in mind when making or accepting a Calderbank offer.
What happens if a Calderbank offer is rejected or ignored?
If you make a Calderbank offer and it’s rejected or ignored, it’s extremely likely the court will closely consider the other party’s conduct with either of these courses of action and it may have an effect on the costs order that the court makes if the matter proceeds to a full trial and the existence of the offer is disclosed at the end of the proceedings. Likewise, if you receive a Calderbank offer, it’s wise to give it due thought and respond with full reasons as to why you believe it to be unreasonable or otherwise incapable of acceptance.
Summary
Calderbank offers have some advantages if used tactically and carefully in the course of a dispute. As we’ve discussed, it may be that this type of settlement offer is preferable over the use of a Part 36 offer for many reasons or it might even be the only kind of settlement offer that can be realistically made in certain types of proceedings. Whether you’re thinking of making a Calderbank offer or you’ve received one, the most important thing is to obtain advice from a business dispute solicitor to maximise the potential to secure the best possible outcome for your business.
