Without Prejudice: How It Works, Common Mistakes & When To Use it.
Without prejudice is frequently used in legal and professional negotiations. Simply put, it is an official term that shields communications from being used as evidence in court proceedings.
Its purpose is to encourage open and honest discussions between parties, without fear that what is said or written will be used against them later.
In this guide, we explore the nuances of without prejudice, breaking down what it means, how it works, common mistakes, and when to use it.
What does without prejudice mean?
Without prejudice is a rule that allows disputing parties to discuss potential settlements frankly and confidentiality, with the assurance these communications cannot be used against them if diplomacy fails.
For example, if one party is attempting to settle a contract dispute, they may make an offer to the other, but don’t want the fact that they made this offer to be used as an admission of liability if the case proceeds to formal litigation.
By marking the offer “without prejudice,” they ensure the court will not hear about the settlement offer unless both parties agree to its disclosure.
Pros and cons of without prejudice
- Encourages open dialogue: It allows parties to explore solutions and make concessions without the risk of their words being used against them, fostering more honest and open discussions.
- Protects confidentiality: Settlement offers and terms remain private, enabling parties to negotiate with greater flexibility and creativity – without the fear of public or legal repercussions.
- Boosts the chances of resolution: By creating a safe space for discussions, it help facilitate mutually beneficial settlements, reducing the likelihood of disputes escalating to formal litigation.
- Minimises litigation risks: By encouraging out-of-court settlements, the rule helps avoid costly and time-consuming litigation, allowing both parties to negotiate freely without worrying about damaging their legal position.
- Potential for abuse: The rule can be misused to hide improper conduct, such as misrepresentation or even fraud. This can make it harder to parties accountable if they engage in bad faith negotiations or unethical behaviour.
- Uncertainty in application: There can be uncertainty around what qualifies as without prejudice. If a court decides the communication wasn’t part of a genuine settlement attempt or the label was misapplied, it may lose its protection.
- Lack of transparency: The confidentiality of without prejudice communications can prevent either party from sharing important information with third parties or the public, potentially hiding aspects of the case that could affect others.
How without prejudice works in practice
- Genuine attempt at settlement: The communication must be part of an actual negotiation process aimed at resolving a dispute.
- Relevance to the subject matter: The conversation or correspondence must be relevant to the dispute. Unrelated communications are not protected.
- Appropriate labelling: The correspondence must be clearly marked “without prejudice” to ensure it is protected. For verbal conversations, you must explicitly state at the start that the discussion is “without prejudice”.
- Agreement: All parties must acknowledge and agree the conversation is intended to be confidential and aimed at settlement.
The difference between ‘open’, ‘without prejudice’, and ‘protected’ communications
- Open communications: Any email, letter, phone call, or meeting that does not have the protection of the without prejudice/protected rule.
- Protected communication: Lets employers hold confidential discussions about an employee’s potential exit or settlement agreement. There is no need for a pre-existing dispute.
- Without prejudice communication: Used in all types of legal disputes. Requires a pre-existing conflict/negotiation process.
| Open communication | Without prejudice | Protected conversations | |
| Confidentiality/ admissibility in court | Not confidential. Admissible as evidence to show a party’s position. | Confidential. Not admissible unless both parties agree or certain exceptions apply (e.g. costs). | Confidential. Not admissible in employment tribunal claims unless it falls under exceptions like improper behaviour. |
| Purpose | To present or clarify a party’s stance or settlement offer. | Encourages free and open settlement discussions without fear of repercussion. | Allows employers and employees to have confidential discussions about exiting employment. |
| Effect on settlement | Can apply pressure/force a settlement due to fears of repercussions. | Facilitates risk-free negotiations, allowing for more flexibility and concessions. | Provides a confidential space to negotiate mutually agreed exits in employment disputes. |
| Use in negotiations | Typically used when a party wants their position known to the court. | Used when parties want to keep their discussions private and off the record. | Used in employment disputes to discuss possible terms of settlement or exit without the conversation being disclosed in a tribunal. |
When to use without prejudice
Without prejudice communications are a valuable tool in mediation, pre-trial negotiations, and dispute resolution because they allow parties to engage in open discussions that may lead to a resolution without escalating the conflict.
Situations where you might use without prejudice include:
- Exploring potential solutions: If you are pursuing a claim, you may want to make proposals or suggest compromises during settlement discussions without committing to them if negotiations fail.
- Responding to a claim or dispute: If you are disputing a claim made against you but want to propose a potential settlement offer without admitting liability, marking your communication as without prejudice is essential.
What type of disputes use without prejudice?
- Employment disputes: Without prejudice helps employers and employees to negotiate settlements without admissions of liability being used against either party.
- Contractual disagreements: Without prejudice discussions let disputing parties propose resolutions and negotiate settlements without the risk of offers being seen as admissions of fault.
- Commercial litigation: Businesses use without prejudice during disputes over business deals, partnerships, or financial claims, where an out-of-court settlement is preferable.
- Personal injury claims: Settlement negotiations between plaintiffs and defendants frequently involve without prejudice communications to prevent offers from influencing liability if the case proceeds to trial.
- Debt recovery: Without prejudice enables flexible discussions between debtors and creditors, without admissions that could complicate future legal actions.
Without prejudice save as to costs
As a general rule, without prejudice communications are not admissible as evidence. However, an important exception exists: without prejudice save as to costs.
Without prejudice save as to costs means, while a communication is protected during the main proceedings, it can be considered when the court decides who should bear the legal costs.
When a party makes a reasonable settlement offer and the other side refuses to accept it, the principle of without prejudice save as to costs becomes relevant.
If the case proceeds to trial and the party that made the offer achieves a better outcome than the offer, the court can take the rejected offer into account when deciding who should pay the legal costs. After the case concludes, the party that made the offer can argue that the other side should bear more of the legal costs for unreasonably rejecting a fair offer.
Without prejudice conversations
In practice, without prejudice communication can take many forms, including emails, letters, meetings, and even verbal discussions. As long as the conversation is part of a genuine settlement negotiation, the content of that discussion cannot be later used as evidence in court.
Without prejudice conversations are often informal and can take place in various settings, such as face-to-face meetings, video calls, or phone calls.
Key elements of a successful without prejudice conversation include:
- Ensuring all parties understand that the conversation is “without prejudice”.
- Making sure the conversation is aimed at settling an existing dispute.
- Avoiding mixing settlement discussions with admissions of liability, as this could weaken the protection.
Without prejudice letter
A without prejudice letter is a formal written communication sent during settlement negotiations. As previously discussed, this type of correspondence must be clearly labelled as “without prejudice” to protect its contents from being disclosed in court.
Here is a general structure for a without prejudice letter:
- Heading: Clearly marked as “WITHOUT PREJUDICE” at the top.
- Introduction: Stating the purpose of the letter, i.e. to explore a potential settlement or respond to a claim.
- Body: Outlining the terms of the settlement offer, along with any reasoning or concessions. It is important to ensure the language used does not admit liability.
- Closing: Reiterating that the correspondence is without prejudice and proposing the next steps, such as further negotiation or an invitation for the recipient to respond with their own offer.
Properly drafted, a without prejudice letter can lead to an out-of-court resolution without undermining a party’s legal position. Expert legal support is essential when drafting any without prejudice letters.
Without prejudice and subject to contract
Without prejudice and subject to contract is commonly used in commercial negotiations. It combines two legal protections:
- Without prejudice: Protects the confidentiality of settlement discussions.
- Subject to contract: Indicates that any agreement reached in the negotiations is not legally binding until a formal contract is signed.
By using “subject to contract”, disputing parties ensure their discussions, including any tentative agreements, are not legally binding until a formal written contract is agreed. This protection is often used in complex commercial litigation.
Example of without prejudice subject to contract
A business negotiating an agricultural land dispute might send a letter marked “without prejudice and subject to contract” proposing specific terms, such as pricing or timelines. This ensures, even if the terms are agreed upon in principle, they are not enforceable until a full contract is signed.
Misuse of the without prejudice label
Without prejudice misuse occurs when the term is applied inappropriately. Simply marking a communication “without prejudice” does not automatically guarantee its protection. Courts will examine whether the communication meets the necessary criteria.
When the courts encounter misuse, they can disregard the “without prejudice” label and allow the communication to be used as evidence. Proper legal advice is essential to ensure the correct application and limitations of the term.
Common examples of misuse include:
- Routine correspondence: Marking standard business communications or updates with “without prejudice” when they aren’t part of settlement negotiations.
- No existing dispute: Applying the label to discussions or communications where no dispute is present, which invalidates the “without prejudice” protection.
- Hiding admissions of liability: Using “without prejudice” to try and shield admissions of guilt or responsibility, even though they aren’t tied to genuine settlement offers.
- Impropriety: Without prejudice material may lose its protection if it provides evidence of fraud, undue influence, misrepresentation, perjury, blackmail, or other forms of misconduct.
Mistakes when using without prejudice
While the without prejudice rule is a valuable tool, simple mistakes can undermine its effectiveness.
Here are some common errors to avoid when using without prejudice communications:
- Forgetting to clearly label the communication “without prejudice.”
- Using unclear language
- Assuming verbal discussions are automatically protected
- Failing to get agreement
- Using ‘without prejudice’ in non-settlement communications/where no dispute exists
- Mixing ‘open’ and ‘without prejudice’ communications
- Failing to ensure all settlement-related communications are marked without prejudice.
Practical tips for using without prejudice
It’s important to apply without prejudice communications correctly to ensure they are protected.
Use these tips to keep your communications confidential and support effective, risk-free settlement discussions:
Do’s
- Properly label communications: Always mark letters, emails, or any written settlement offers with the words “without prejudice” at the top of the document to ensure all parties understand the intent to keep it confidential.
- Clearly state verbal discussions are without prejudice: Always explicitly declare at the beginning of any verbal settlement discussions that they are without prejudice. Ideally, follow up with written confirmation.
- Reaffirm status: Periodically reaffirm that all communications remain without prejudice. If you need to shift part of the conversation to an “open” status, make sure to clearly specify that section (though this should be avoided unless absolutely necessary).
- Stick to settlement negotiations: Ensure all content within the communication is focused on resolving the dispute. Anything unrelated could be excluded from protection.
- Get agreement from all parties: Make sure all parties in the negotiation agree, and are aware the communications are conducted under without prejudice terms, especially during verbal or informal discussions.
- Keep records: Always keep detailed records of all without prejudice communications to avoid any confusion about what was discussed. Records are invaluable should there be a dispute over whether the protection applies later.
Don’t
- Admit liability: Avoid language that could be seen as admitting fault or liability. This could undermine the protection of the without prejudice rule and make your admissions admissible in court.
- Include unnecessary detail: Avoid including irrelevant information or unnecessary details that aren’t directly related to settling the dispute. Such content might not be covered by without prejudice protection.
- Combine open and without prejudice content: Avoid mixing open communication with without prejudice content in the same document. If you need to present something openly (such as a legal position), send it in a separate communication to maintain clarity.
- Use without prejudice without a dispute: Do not label communications as without prejudice unless a genuine dispute exists. Without a dispute, the protection won’t apply.
- Rely solely on verbal agreements: Avoid depending entirely on verbal conversations. Always follow up verbal discussions with a written record to maintain clear evidence of the without prejudice status.
- Assume partial discussions are protected: Do not assume because part of a discussion is without prejudice, the entire communication is protected. Always keep the protected and open discussions clearly separate.
Maximising the benefits of without prejudice communication
Without prejudice lets you negotiate frankly and confidently, knowing your words won’t come back to haunt you in court. In the right circumstances, it can safeguard your position, increase the likelihood of reaching a favourable settlement, and potentially minimise your exposure to costly court proceedings.
At Summit Law, our litigation solicitors are experts in using without prejudice communications to protect our clients’ interests. We can help you navigate settlement discussions, ensure confidentiality is maintained, and make sure you achieve the best possible outcome.
For your free consultation, contact our commercial litigation lawyers today on 020 7467 3980 or complete the enquiry form on this page.