To write a without prejudice letter, identify your existing dispute, propose clear settlement terms, and use “Without Prejudice” only for a genuine attempt to resolve it. Add “Subject to Contract” if you want any settlement to become binding only after you have agreed and signed a formal document.
Your wording has two separate jobs: supporting a protected settlement negotiation and making clear when you intend to commit. A heading alone does not create protection, and a protected exchange can still produce an enforceable agreement.
Use the guidance below primarily for disputes in England and Wales. If your dispute falls under Scottish, Northern Irish, US or Australian law, obtain jurisdiction-specific advice before adapting the letter. Your US settlement correspondence, for example, falls under different evidential rules.
When Does Without Prejudice Protection Apply?
You receive without prejudice protection when your communication forms part of a genuine attempt to settle an existing dispute. Your letter’s substance and surrounding circumstances determine protection, including whether any admission of liability belongs to that negotiation.
Why Must There Be an Existing Dispute?
You need an identifiable disagreement about your legal rights or obligations. You do not need to have started court proceedings: a disputed invoice or a contested dismissal can provide the necessary context.
Your communication must also seek a settlement. When you make a genuine attempt to settle an existing dispute, your written or spoken statements are protected against use as evidence against you in legal proceedings, subject to recognised exceptions.
Explain the disagreement briefly before presenting your proposal. If you are discussing an ordinary commercial deal without any dispute, adding the heading will not give you this protection.
What Does the Protection Cover, and What Are Its Limits?
You should expect the rule to protect the settlement discussion as a whole, including concessions made to explore a resolution. Protection also applies to qualifying discussions without the label, although clear labelling helps identify your intention.
Keep these limits in mind:
- You cannot make existing documents privileged merely by attaching them to your offer.
- You cannot assume the heading creates a separate, enforceable confidentiality obligation.
- You should expect relevant communications to be considered if a court must decide whether you reached a settlement or interpret its terms.
- You cannot rely on the rule to shelter fraud, blackmail or conduct meeting the narrow “unambiguous impropriety” exception.
Avoid assuming that every allegation of misconduct defeats protection. If your exchange involves threats or discriminatory remarks, obtain advice before disclosing it in proceedings.
How Does Without Prejudice Differ From Subject to Contract?
You use “Without Prejudice” to address the evidential treatment of settlement discussions. You use “Subject to Contract” to indicate that you intend to become bound only through a formal agreement.
For example, you might agree a payment figure while still negotiating the release of claims. “Subject to Contract,” reinforced by an express signing condition, helps preserve that distinction.
You should keep that condition consistent throughout your correspondence. Your later words or conduct can affect whether you have maintained it, so avoid describing a provisional deal as a completed settlement.
An Adaptable Settlement Letter You Can Copy
You can adapt the following letter to propose terms while reserving commitment until a formal agreement is signed. This version combines without prejudice wording with an express subject-to-contract condition.
A General Without Prejudice Letter Example
Replace every bracketed field before sending your letter. Retain the signing condition if you want the exchange to remain provisional.
WITHOUT PREJUDICE AND SUBJECT TO CONTRACT
Date: [Date]
To: [Recipient’s name and address or email]
From: [Your name or business name and contact details]
Reference: [Dispute, contract, invoice or claim reference]Dear [Recipient’s name],
Proposed settlement of [identify the dispute]
You are receiving this proposal to explore settlement of the dispute concerning [brief description].
Your position is understood to be [neutral summary of the recipient’s position]. The position advanced by [sender’s name] is [brief summary of your position]. The principal issues in dispute are [identify the contested issues].
To resolve those issues, you are invited to consider these proposed terms:
- Payment: [Payer] would pay [payee] £[amount] by [date or clearly defined payment trigger].
- Breakdown: The proposed total comprises [principal sum or contractual entitlement], [negotiated compensation] and [interest, costs or other agreed component].
- Scope: The settlement would resolve [identify the particular claims or dispute], subject to [express exclusions].
- Other obligations: [Identify any agreed reference, return of property, remedial work or other obligation, including responsibility and timing.]
- Legal costs: [State the proposed treatment of each party’s legal costs.]
- Formal agreement: You and [sender’s name] would record the complete settlement terms in a written agreement signed by all parties.
This proposal is made without admission of liability by [sender’s name]. No binding settlement will arise unless and until all parties sign the formal written agreement, even if you indicate agreement in principle beforehand.
Please respond to [contact details] by [time, time zone and date], indicating whether these terms provide a basis for preparing that agreement. You are welcome to suggest alternative terms.
This proposal remains available for discussion until that deadline, unless withdrawn earlier in writing. You should continue to comply with all applicable procedural requirements and claim deadlines during negotiations.
Yours sincerely,
[Your name]
[Your role, if applicable]
Your heading still requires the factual conditions explained above. If your exchange concerns an employment exit without an existing dispute, obtain advice about the separate rules for protected conversations.
Which Placeholders and Clauses Should You Change?
When comparing without prejudice letter templates, check whether you are being asked to make an immediately binding offer or a provisional proposal. The example above deliberately requires a later signed agreement.
Adapt the following points carefully:
- Party names: Use the correct legal entity, including a company’s registered name where relevant.
- Dispute description: Identify the contract, employment relationship or proceedings precisely.
- Payment breakdown: Separate amounts already claimed as due from additional settlement compensation.
- Release wording: Specify which claims you propose to settle and any rights you intend to preserve.
- Additional obligations: Include only terms relevant to your dispute.
Keep broad confidentiality provisions and extensive waivers for careful drafting in the settlement agreement. If you need either obligation to bind immediately, obtain advice about documenting it separately.
How Should You State the Offer and Response Deadline?
Your settlement proposal should identify who pays, what the amount covers and when payment becomes due. State expressly how you propose to treat interest, VAT where relevant, and legal costs.
Use a definite response deadline with a time zone. Give the recipient a reasonable opportunity to assess the proposal and obtain advice; unexplained urgency can undermine productive negotiation.
With the subject-to-contract example, ask whether the terms are acceptable in principle. If you want acceptance itself to create a binding settlement, have the offer redrafted so its essential terms and acceptance mechanism are complete.
How Do You Adapt the Letter to Your Dispute?
Your letter should reflect the rights and remedies involved in your particular dispute. In employment negotiations, separate contractual entitlements from negotiated exit compensation; in commercial negotiations, define the debt or performance obligations being compromised.
Employment Disputes: Redundancy, Notice Pay and Exit Terms
You should distinguish your salary and holiday pay from any additional payment offered to settle claims. Identify notice pay and any redundancy entitlement separately, including whether the amount or entitlement is disputed.
For an employment exit, address:
- Your proposed termination date.
- Whether you will work your notice, receive payment in lieu or take garden leave.
- Outstanding pay, accrued holiday and benefits.
- Any statutory or contractual redundancy payment.
- Additional compensation for settling specified claims.
- Your reference, property return and contribution towards advice costs.
Avoid describing your entire package as tax-free. Your notice-related payments and termination compensation require separate tax analysis, and your agreement should explain the proposed deductions.
If you have no existing dispute, pre-termination discussions may receive protection under section 111A of the Employment Rights Act 1996. That protection concerns ordinary unfair dismissal claims and has different conditions and exceptions; you should not assume it covers discrimination, automatically unfair dismissal or breach of contract claims.
Commercial Disputes: Unpaid Invoices and Breach of Contract
Your commercial proposal should identify the relevant contract and the disputed obligation. For unpaid invoices, specify the invoice references and explain whether your proposed figure includes interest or other recovery charges.
If you offer instalments, set out each payment date and the consequence you propose for default. Obtain advice before including a clause that revives the original claim or accelerates payment, because its wording affects enforcement.
For a breach of contract dispute, your settlement might involve replacement work or delivery alongside a payment. Define the required performance and completion date, and decide when the release takes effect if obligations remain outstanding.
Which Communications Should Remain Open?
Keep the correspondence you need to prove your position separate from your settlement discussion. Your factual complaint, contractual notice or pre-action letter should be sent openly where you need to rely on it later.
Useful candidates for separate open correspondence include:
- Your grievance or appeal.
- A demand identifying an unpaid contractual amount.
- A notice required under your contract.
- Requests for documents or explanations.
- Procedural correspondence concerning deadlines.
Use a fresh email thread for your settlement proposal. Before attaching documents, check whether you are providing evidence of your claim or explaining the compromise you are willing to consider.
Should You Use Without Prejudice Save as to Costs?
Use “Without Prejudice Save as to Costs” when you intend your settlement offer to be available for a later costs decision after the substantive dispute has been determined. Choose it with the relevant court or tribunal costs regime in mind.
When Can a Settlement Offer Be Shown on Costs?
Your “save as to costs” wording signals that the offer remains protected during the decision on liability and remedies, while permitting later consideration on costs. You should include that wording when making the offer if that is your intention.
With an ordinary without prejudice exchange, you should not assume unilateral permission to disclose it on costs. The Court of Appeal held in Walker v Wilsher that without prejudice correspondence could not be taken into account to deprive a successful party of costs.
Even with appropriate wording, you have no guarantee of recovering legal costs. The court considers the applicable rules and circumstances, including the offer’s clarity and the parties’ conduct.
How Do Calderbank Offers Differ From Part 36 Offers?
You use a Calderbank offer to make a settlement proposal on a without prejudice save as to costs basis outside the formal Part 36 framework. A Part 36 offer must satisfy the Civil Procedure Rules to attract that regime’s consequences.
| Feature | Calderbank Offer | Part 36 Offer |
|---|---|---|
| Governing framework | General settlement and costs principles | CPR Part 36 |
| Form requirements | Flexible drafting | Prescribed requirements |
| Costs treatment | Discretionary assessment | Rule-based consequences, subject to exceptions |
| Scope for tailored terms | Broad | Constrained by compliance requirements |
Your Calderbank offer might accommodate an unusual commercial arrangement, but you should explain precisely what acceptance would achieve. For Part 36, obtain advice about the required wording, relevant period and applicable payment provisions.
Do not relabel the copyable subject-to-contract example as a Part 36 offer. You need a separately drafted offer that complies with the rule.
Why Are Employment Tribunal Costs Different?
In an employment tribunal, you ordinarily bear your own legal costs. You should therefore assess a settlement offer without assuming the unsuccessful party will reimburse the winner.
Costs orders remain possible on specified grounds, including certain unreasonable conduct or claims with no reasonable prospect of success. Your opponent’s rejection of an offer does not automatically satisfy those grounds.
A clearly reasoned offer can become relevant to a tribunal’s assessment of conduct. Avoid telling your employer or employee that rejection will inevitably result in a costs order.
What Should You Check Before Sending or Accepting?
Before sending or accepting your proposal, check the factual basis, procedural deadlines and intended point of commitment. Your without prejudice letter and eventual settlement agreement perform different functions, so review each on its own terms.
Check the Facts, Tone and Delivery Details
Verify your chronology against the documents before making allegations. Use measured language that identifies the disagreement and explains your proposed resolution.
Check the recipient’s authority, particularly where you are negotiating with a manager or intermediary. For a business dispute, confirm which entity would pay and which entity would receive the release.
Keep the exact version you send, its attachments and evidence of delivery. If you revise the proposal, identify which earlier version it replaces and whether the previous deadline still applies.
Keep Claim Deadlines Running During Negotiations
Continue calculating and protecting your claim deadlines while you negotiate. Your offer, the recipient’s silence and an agreement to keep talking do not themselves suspend limitation periods.
For an employment tribunal claim, Acas early conciliation affects the calculation of relevant time limits when the statutory conditions are met. Check the deadline for each claim separately, including any requirement to notify Acas.
For civil proceedings, obtain advice promptly if limitation is approaching. A properly drafted standstill agreement requires specific attention, and you should continue meeting existing court directions unless they are formally varied.
When Does Acceptance Create a Binding Settlement?
Your acceptance creates a binding settlement when the applicable contract requirements are satisfied and any required conditions have been met. Without prejudice protection does not, by itself, prevent contract formation.
If you exchange a complete offer and an unqualified acceptance without reserving formal execution, you risk becoming bound through correspondence. A later plan to prepare a longer document does not necessarily postpone that result.
The template expressly makes signature a condition. Preserve that wording while negotiating, and check whether your final agreement makes payment a condition of the release or an obligation enforceable after the release takes effect.
When Is Independent Legal Advice Required?
You need advice from a qualifying independent adviser when using an employment settlement agreement to waive specified statutory employment claims. The statutory conditions also require a written agreement and identification of the particular complaints or proceedings being settled.
Your adviser must explain the agreement’s terms and effect, including its effect on your ability to pursue the relevant tribunal claims. The agreement must identify the adviser, and the required insurance or indemnity arrangements must be in place.
Your Acas-conciliated COT3 follows a separate route and can become binding before signature once agreement has been reached through conciliation. In an ordinary commercial settlement, independent advice is not a universal validity requirement, but obtain it before accepting a substantial release or unfamiliar enforcement terms.
Use the Right Wording for a Genuine Settlement Offer
You should use a without prejudice letter to advance a clear proposal within an existing dispute, with separate wording explaining when you intend to become bound. Keep contractual entitlements distinct from negotiated compensation, and select costs wording for the proceedings you face.
Before sending, replace every placeholder and check that your proposal matches the commitment you intend to make. Continue protecting your deadlines, and obtain advice before accepting settlement terms that release claims or require an employment settlement agreement.