Acceptance Can Follow Rejection of Counter-Offer

When a claim is brought for damages, the party that is claimed against can make an offer to the claimant under a procedure contained in Part 36 of the Civil Procedure Rules. ‘Part 36 offers’ are designed to make it more likely that a case will be settled before coming to court.

A recent case in the Court of Appeal looked at the position in which a Part 36 counter-offer was made and rejected, but subsequently accepted. Although the procedure includes the principles of offer and acceptance – key principles in contract law – the other principles of contract law are not applicable.

The case involved a claim for an injury resulting from a trip. The council responsible offered £1,150 in compensation, which was rejected. The claimant made a counter-offer, indicating that she would accept £2,500, which the council rejected. Later, the council sought to accept the offer, which had not been withdrawn. The Court confirmed that in the absence of a formal withdrawal of the offer, it could still be accepted. This differs from the position in contract law, in which an offer, once rejected, ceases to have effect.

Getting the strategy right regarding Part 36 offers is important because if an offer is not accepted and the court subsequently rules that the sum payable to the claimant should be less than or equal to the Part 36 offer, the claimant will normally bear some of the costs of the action. On the other hand, if the settlement ordered by the court ‘beats the offer’, it is the defendant who stands to pick up the bill for the costs.

The Court recently considered the question of who bears the costs when the Court awards judgment in a sum only slightly more than the Part 36 offer. The ruling indicates that in general, if the judgment ‘beats the offer’ by even a small amount, the loser will bear the costs.