If you are involved in a dispute with another person or company, it can be in your best interest to settle it out of court. Although the opposing party may hold the same opinion, it is not always possible to reach a compromise through an alternate conflict resolution approach. Both you and the opposing party may submit a formal offer to settle the dispute, along with any connected conditional payments and obligations, if the matter does continue to court procedures. If the recipient rejects this offer, it will be advantageous to the giver and potentially harmful to the recipient. In legal parlance, this is a “offer of compromise.” In this Legal Kitz article, we will explain important factors to be mindful of whilst making an offer of compromise.
Why should I compromise?
Contrary to what the media may have you believe, going to court is not at all exciting. Legal proceedings, which include a trial at the end, can be expensive, drawn-out, time-consuming, and, of course, uncertain. Unfortunately, there are times when parties run out of money and are unable to press their case. Despite some claims or defendants having a compelling case, this still occurs. It can be useful to explore an early compromise between both yourself and the opposing party, as this will have shared benefits and saves you both time and money.
The legal system promotes out of court settlements between disputing parties. If you do make an offer, you should have a tactical edge in case the other side rejects it and you still wind up in court. An offer of compromise might be helpful in this situation.
How do I put forward a compromise offer?
According to the law, a compromise offer is a defined notion. An offer of compromise must satisfy certain conditions in order to be accepted.
An offer of compromise must:
- be made in writing;
- propose a settlement that does not include legal fees;
- must not be inclusive of fees;
- state that it is an official letter of compromise and refer to the relevant law;
- contain sufficient detail about the offer; and
- be open for acceptance for a minimum period of time (according to the law).
The only provisions that can be included in an offer of compromise that pertain to the costs of the proceedings are the proposal that the offeror will pay costs “as agreed or assessed” up to the time the offer was made.
What are the consequences of a compromise offer?
Offers of compromise require strategy because the process of offering, accepting, or rejecting one can have a significant impact on the outcome. This depends on whether the ultimate outcome is better or worse for the one making the offer or the person receiving it.
The scenarios below illustrate what could happen when you make a compromise offer to the opposing party in an effort to end the conflict. The main outcome is frequently determined by how the court determines costs and whether one side pays the other side’s legal fees.
1. Your offer was accepted and followed by the other party
Your assent to an offer of compromise with the other party may be regarded as legally obligatory. A deed of settlement and release that explicitly outlines each party’s obligations is a common way to formalise this. The disagreement should be settled as long as both parties abide by these commitments.
2. The other side accepted your offer, but failed to adhere to it
There may be repercussions if legal requirements are broken. A deed’s signature indicates an intent for a party to abide by its legal provisions. You will be able to use the document in court to demand damages (ie. compensation) and cover some or all of your legal costs for having to pursue your rights under the deed, if the other party does not adhere to their obligations as stated in the agreement.
3. The outcome was worse for the other side because they rejected your offer
The dispute can then move to court if you make the opposing side a compromise offer and they reject it. If you prevail in your lawsuit, the judge can award you an outcome that is equivalent to (or superior to) what you would have earned if your offer had been accepted.
Generally speaking, the law in this case recommends that, in order to save everyone time and money, the opposing side should have accepted the offer. The court will typically order the other side to pay a larger percentage of your legal fees than usual, because of their refusal and the outcome as a result.
4. Your offer was rejected by the other party, and the outcome was worse for you
Given that the outcome was better than what you had provided, the court might accept the other side’s rejection of the offer as valid and reasonable in this case, thus there aren’t as many unusual implications.
5. A special balancing situation
If you initiated legal action and the opposing party made a compromise offer, you can reject it in the hope that you will obtain a better result by pursuing the matter.
If the final result is the same (or worse) for you than what the other side proposed, you may receive a portion of your costs reimbursed up to the time the other party made their offer; and be obligated to pay the other side’s expenditures accrued after the offer was made.
Legal advice
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