How to protect your position in settlement negotiations

In the course of a dispute, and faced with the risks of litigation, there’s invariably a point at which the parties will want to explore whether there’s a basis on which the claim can be settled by negotiation.

When that point comes, there will understandably be some reserve about how to approach the negotiation. At the heart of that reserve are two common concerns: firstly, if I negotiate, will my position be weakened? Secondly, if I do start negotiating, how do I ensure that I’m not committed to a deal until I’m absolutely ready to do so, with all terms having been agreed?

The law provides some very useful protection to address these two concerns and encourage dialogue, by attributing meaning and effect to the use by the parties of certain specific words.

Using the words ‘without prejudice’ in a communication that includes an offer to settle a claim ensures that the content of the communication cannot be relied upon in a court of law as evidence of either an express or implied admission in respect of what is alleged.

As a successful negotiation will inevitably involve compromise on both sides, being able to preserve your legal position, in case a deal is not reached, removes a barrier to entering the negotiating room in the first place. These two words provide a ‘safe space’ for the essential to and fro in the parties’ respective positions that constitutes the negotiation.

The words ‘subject to contract’ also play a vital role – specifically, in respect of the second concern. How do I negotiate in a way that doesn’t lock me into an agreement until all the pieces on the board are placed where they need to be?

There’s rarely just one ingredient on which to agree to reach a settlement. One party agreeing to pay a sum of money to settle a claim is of little value without knowing when that payment will be made, and most negotiations involve many more components than those two. Again, being able to preserve your legal position against the risk of failure to reach agreement on all the terms required for a settlement is going to be vital.

In that context, attaching the words ‘subject to contract’ to a negotiation ensures that the deal is done only when it is fully done.

These two protections for a negotiation are well recognised. Treating the words lightly, however, is not without implications, as rehearsed in the recent case of Baltimore Wharf SLP v Ballymore Properties Limited v WSP UK LIMITED (formerly known as WSP Buildings Limited) [2026].

The underlying principle is that once the qualification of ‘subject to contract’ applies in the course of a negotiation, this will only cease to apply if all parties expressly agree to this, or if such agreement is to be necessarily implied from the circumstances.

In the Baltimore Wharf case, the argument centred on whether an exchange of emails between solicitors that included an expression of agreement to the terms of a travelling draft settlement agreement marked ‘subject to contract’ necessarily implied that the deal was done, notwithstanding that the draft document recording the terms and including the conditionality words hadn’t been executed by signature.

While there looked to be consensus reached in the exchange of communications, the court found on the facts that there was “nothing to show that the clear continued use of the subject to contract words in the travelling draft Settlement Agreements was being abandoned”. It followed that the deal was not done and the litigation continued. In the sense of ages past, ‘until the ink was dry on the paper’, there was no agreement.

There’s a very human point here. The momentum to settle a dispute towards the end of a negotiation can encourage a premature sense of completion. As our experienced dispute resolution lawyers will guide you, the match isn’t over until the final whistle blows.