A “Part 36 offer” is an offer under Part 36 of the Civil Procedure Rules to settle a claim. Part 36 offers carry specific costs consequences which make them tactically a very significant tool in settling disputes.

It is not widely known, but Part 36 offers can be made before proceedings are commenced and can indeed be a useful tool to prevent formal proceedings altogether.

If as a claimant you are thinking of making a Part 36 offer, or as a defendant you are in receipt of one, you should bear in mind that the consequences have changed for offers made by claimants on or after 1 April 2013.

Where a claimant makes a Part 36 offer which relates to a claim for money and the defendant does not accept and fails to 'beat' in court, the defendant can be made by the court to pay what is in effect a 'penalty' equal to 10% of the claimant's damages (subject to a limit of £75,000). This is in addition to the existing sanction of having to pay the claimant's costs of proceedings on an indemnity, rather than standard, basis plus interest of up to 10% above base rate.

This new penalty is designed to encourage claimants to make Part 36 offers, and will mean that defendants will have to carefully consider the risk of having to pay a potentially significant additional sum if they do not accept the offer and are subsequently unsuccessful in court.

If as a claimant (or potential claimant) you are thinking of making a Part 36 offer, or as a defendant (or potential defendant) you are in receipt of one, you should read Part 36 carefully and seek legal advice.