The legal world does not operate according to the principles of Law & Order, Boston Legal or Suits. Running a trial is costly, sometimes so costly that a litigant will be forced to abandon his or her cause of action simply because they have no more money to try the case. Accordingly, it is sensible to consider settlement prior to the commencement of legal proceedings. One way to do this is via an offer of compromise. Either party to the proceedings can make an offer, at any stage of the proceedings prior to judgment, under the Uniform Civil Procedure Rules 2005 (NSW). An offer of compromise is an invaluable tool towards bringing about a resolution of the matter without having to proceed with a pricey lawsuit.

Making an offer of compromise

For an offer of compromise to be valid and capable of acceptance, certain pre-conditions need to be satisfied. The offer must:

  1. be made in writing;
  2. be made exclusive of costs;
  3. bear a statement to the effect that it is an offer of compromise and that it is made under the Uniform Civil Procedure Rules 2005 (NSW);
  4. contain sufficient particulars to enable the receiver to consider the offer entirely; and
  5. not be withdrawn during the period during which it is open for acceptance.

If an offer of compromise is not accepted within the stipulated timeframe, it will lapse. Similarly, if it is accepted, it will act as a legally binding promise to the parties.

Documenting an offer of compromise

To ensure that the claim cannot be re-litigated, it is imperative that an accepted offer of compromise be reduced into writing. This can best be achieved via the execution of a deed of settlement or release. The document should be drafted by a qualified legal profession to ensure that the breadth and scope of the claim is appropriately covered.

If legal proceedings are already on foot, a notice of discontinuance will also need to be filed with the court to bring the proceeding to an end.

Cost implications of rejecting an offer of compromise

Every offer of compromise has to be thoroughly examined and seriously entertained. Rejecting a fair offer of compromise in circumstances where the court ultimately finds against you may result in the winning party being awarded costs on an indemnity basis. On the whole, an award for costs on an indemnity basis is much more favourable to the recipient than if costs were awarded on a standard basis, as is the norm.

Conclusion

They say that the most successful lawyer is one that has never had to step foot inside a courtroom. To litigate a cause of action is no trifling matter and should be reserved for those rare instances where an important question of law or fact must be answered. Accordingly, it is practical to explore alternatives to court proceedings. If you would like to make an offer of compromise, reply to an offer of compromise, or want more information concerning the same. Our friendly team of LegalVision lawyers would be happy to assist you with any question or queries that you may have. Contact us today to see how we may help.

Vanja Simic

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