On Day One of Contract Law they teach you that if a party makes an offer (“Offer A”) and the other party rejects the offer, the rejection of the offer means Offer A is no longer open for acceptance in the future.
They also teach you that if a party makes an offer (“Offer B”) and the other party makes a counter-offer (“Offer C”), that counter-offer amounts to rejection of Offer B and Offer B therefore cannot be accepted in the future.
It is also well established that Part 36 is a self-contained code which provides expressly for the manner in which offers may be made, modified and withdrawn and that as such it displaces the ordinary rules of common law. The CPR provides that unless a Part 36 offer is expressed to be time limited, it remains open for acceptance unless written notice has been served withdrawing the offer. This means, for example, that where a party makes an offer (“Offer D”) the other party can make as many counter-offers or counter-Part 36 offers as they like but still accept Offer D at some point in the future (if it has not been expressly withdrawn by that stage).
An interesting twist on this issue come in the recent case of DB UK Bank v Jacobs Solicitors (claim no. HC2013000358) on which Andrew Hochhauser QC, sitting as a High Court judge, said there was “apparently no authority directly on the point”.
The court ruled that that a claimant’s Part 36 offer amounted to a counter-offer, meaning that an earlier common law offer by the defendants was no longer open for acceptance. In other words, where a party makes an ordinary offer (“Offer E”) and the other party makes a Part 36 offer in response (“Offer F”), the consequence is that Offer E is no longer open for acceptance.
Although this is relevant for all litigation, it is particularly important in the context of costs litigation.
PD47 para.8.3 states:
“The paying party must state in an open letter accompanying the points of dispute what sum, if any, that party offers to pay in settlement of the total costs claimed. The paying party may also make an offer under Part 36.”
It would be a mistake to assume:
- All open offers accompanying points of dispute are low speculative offers that will be increased on.
- Where such an offer is rejected (whether expressly or by way of counter-offer or alternative Part 36 offer), the offer can still be accepted at a future date.