So…You Have Received A Part 36 Offer; What It Means and What to Do Next
Receiving a Part 36 offer is a significant moment in any civil litigation in England and Wales. It signals that one party is formally inviting the other to settle the dispute on specific terms, using a mechanism set out in Part 36 of the Civil Procedure Rules. Understanding the implications of such an offer is crucial, as the decisions you make in response can have a profound impact on the outcome of your case, particularly in relation to costs.
What Is a Part 36 Offer?
A Part 36 offer is a formal, written proposal to settle a dispute, made in accordance with the requirements of Part 36 of the Civil Procedure Rules. Either the Claimant or the Defendant can make a Part 36 offer at almost any stage of the proceedings, including before proceedings have even been issued. For the offer to be valid, the offer must clearly state that it is made pursuant to Part 36, set out the terms of settlement, and specify a “relevant period” of at least 21 days during which the offer can be accepted with standard cost consequences.
The purpose of the Part 36 regime is to encourage parties to resolve disputes without the need for a full trial. The rules are designed to create a strong incentive to settle by attaching significant cost consequences to the acceptance or rejection of such offers.
What is the “Relevant Period”?
The “relevant period” is a minimum of 21 days from the date the offer is made. If you accept the offer within this period, you are entitled to your reasonable legal costs up to the date of acceptance. If you accept after the relevant period, the cost consequences may change, and the court will have discretion over costs incurred after the period ends.
Does the Offer Automatically Expire After the Relevant Period?
A crucial feature of a Part 36 offer is that it does not automatically expire after the relevant period has passed. Unless the offeror expressly withdraws the offer in writing, or the court orders otherwise, the offer remains open for acceptance at any time before the Trial, and yes, even at the doors of court. This means that even after the relevant period has ended, the offeree can still accept the offer, although the cost consequences may change. The continuing availability of the offer can be strategically important, as it keeps the possibility of settlement alive throughout the litigation process, while protecting the offeror's position on costs.
What Exactly are “Reasonable Costs”?
Reasonable costs upon acceptance of a Part 36 offer under the Civil Procedure Rules are those costs assessed on the standard basis, which means only costs that are reasonably and proportionately incurred unless the case falls within a fixed recoverable costs regime, in which case only the prescribed fixed costs and permitted disbursements are recoverable. The court determines reasonableness by reference to all the circumstances of the case, including proportionality, necessity, and the conduct of the parties.
Are you the Claimant receiving a Part 36 Offer from the Defendant?
As the Claimant, receiving a Part 36 offer from the Defendant means the Defendant is proposing to settle the claim on certain terms, usually by paying you a specified sum of money. The offer is not simply a suggestion; it is a formal step that can have serious implications for costs if the case proceeds to trial.
Accepting the Offer
If you accept the offer within the relevant period, the claim is settled on the terms set out in the offer. You will receive the amount offered, and the Defendant will be required to pay your reasonable costs incurred up to the date of acceptance. This provides certainty and finality, allowing both parties to avoid the risks and expense of continuing litigation.
If you accept the offer after the relevant period has expired, you may still settle on the terms offered, but the court will have discretion to determine who should pay the costs incurred from the end of the relevant period to the date of acceptance. In many cases, you may be required to pay the Defendant’s costs for this period, which can significantly reduce the benefit of accepting the offer late.
Rejecting the Offer
If you decide not to accept the Defendant’s Part 36 offer and the case proceeds to trial, you must be aware of the potential cost consequences. If you fail to obtain a judgment that is more advantageous than the offer (for example, if the court awards you less than the amount offered), the court will usually order you to pay the Defendant’s costs from the end of the relevant period, together with interest on those costs. This is intended to penalise parties who unreasonably refuse to settle and to encourage sensible negotiation.
Are you the Defendant Receiving a Part 36 Offer from the Claimant?
If you are the Defendant and receive a Part 36 offer from the Claimant, the Claimant is inviting you to settle the claim for a specified sum or on particular terms. The offer is a formal step, and your response can have significant cost implications.
Accepting the Offer
If you accept the Claimant’s offer within the relevant period, you must pay the amount offered (or comply with the terms proposed) and also pay the Claimant’s reasonable costs up to the date of acceptance. The claim is then settled, and you avoid the uncertainty and potential additional costs of a trial.
If you accept the offer after the relevant period, you may be required to pay additional costs for the delay, as the court will decide who should bear the costs incurred after the relevant period expires.
Rejecting the Offer
If you reject the Claimant’s Part 36 offer and the case proceeds to trial, you face significant risks if the Claimant achieves a better result at trial than the terms of their offer. In such circumstances, the court will usually order you to pay the Claimant’s costs on an indemnity basis, which means the paying party must cover all costs incurred by the receiving party, except those that are unreasonably incurred or unreasonable in amount. The key difference from the standard basis is that, on the indemnity basis, any doubt about whether a cost is reasonable is resolved in favour of the receiving party, making it easier for them to recover a higher proportion of their legal costs, from the end of the relevant period, together with interest on those costs (which can be up to 10% above the base rate). Additionally, you may be ordered to pay an extra sum of up to £75,000 as a penalty. These consequences are designed to encourage Defendants to give serious consideration to reasonable offers to settle.
Making and Responding to Counter-Offers
It is common for parties to respond to a Part 36 offer with a counteroffer, which can also be made under Part 36. However, it is important to understand that unless the original offer is formally withdrawn, it remains open for acceptance. This means that both offers can technically be accepted, potentially leading to procedural complications. Clear communication and careful management of offers are essential to avoid confusion.
When both parties have made Part 36 offers and neither is accepted, the court will consider the offers and the outcome at trial when deciding who should pay the costs. If you obtain a judgment at trial that is more advantageous than your own Part 36 offer, you may be entitled to enhanced costs and interest. Conversely, if you do not achieve a better result than your own offer, you may face the adverse cost consequences described above.
APart 36 offer is a powerful tool in litigation. They are not merely procedural formalities but are intended to encourage early and fair settlement of disputes. The cost consequences attached to these offers are deliberately significant to deter parties from adopting unreasonable positions or prolonging litigation unnecessarily.
If you receive a Part 36 offer, it is essential to:
Consider the strengths and weaknesses of your case, the likely outcome at trial, and the potential cost consequences of accepting or rejecting the offer.
The timing of your response can affect your entitlement to costs. Delaying a decision can result in adverse cost consequences.
The rules governing Part 36 offers are complex, and the implications can be far-reaching. Professional advice can help you understand your options and make an informed decision.
Why Part 36 remains a valuable strategic tool
Adam Benedict’s experience across construction and wider commercial litigation is that a Part 36 offer remains one of the most effective mechanisms for introducing commercial realism into a dispute. In one recent construction matter involving a live development project, it was deployed at a point when proceedings were active, costs were increasing and the wider commercial position required careful management. In those circumstances, a formal offer was an important way of encouraging meaningful engagement while protecting our client’s position on costs.
That reflects a broader pattern seen across litigation. A well-judged Part 36 offer can do more than invite settlement:
it can sharpen the parties’ assessment of risk
create pressure for realistic negotiations
strengthen the offering party’s costs position if the matter does not resolve.
In Adam Benedict’s experience, the combination of procedural leverage and commercial discipline is precisely why Part 36 continues to play such an important role in effective dispute strategy.
In summary
Receiving a Part 36 offer is a pivotal moment in any civil dispute. Whether you are the Claimant or the Defendant, it is vital to understand the rules, the potential cost consequences, and the strategic considerations involved. Taking a Part 36 offer seriously and responding appropriately can make the difference between a favourable settlement and an expensive, protracted dispute.
If you are unsure how to respond to a Part 36 offer, or are considering making one yourself, it is strongly recommended that you seek advice from a qualified solicitor. Professional guidance can help you navigate the complexities of the rules and secure the best possible outcome. Our Dispute Resolution Department at Adam Benedict Limited is here to support you every step of the way. Please contact us at Litigation@adambenedict.co.uk.
