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The terms “without prejudice” or “subject to contract” are often used in settlement negotiations and it is important to understand what they mean to use them to your advantage.
“Without prejudice” means that any statements made throughout settlement negotiations cannot be used in court as evidence of admissions. An ‘admission’ is a previous statement or representation by one of the parties to a proceeding that is adverse to their interests in the outcome of the proceeding. This makes settlement negotiations easier because both parties are reassured that, should the negotiations fail and adjudication begin, whatever was said throughout the course of their negotiations will remain confidential and their interests, rights and arguments in regards to the court case will not be compromised. Any form of communication, whether it be written correspondence like emails or verbal like telephone conversations, can be marked as “without prejudice”. Thus, this veil of confidentiality offered allows the parties to come to a mutually beneficial agreement without extensive legal proceedings.
Unless a “without prejudice offer” is also expressly made “subject to contract”, acceptance of the offer will create a binding agreement. The term “subject to contract” indicates that any offer made is not legally binding until a contract is agreed and signed. This term compliments the veil of confidentiality and further promotes settlement agreements outside of court.