Court of Appeal confirms Part 36 offers cannot be time-limited

In a very recent judgment the Court of Appeal has overturned the High Court's decision that an offer that was expressed to be made under Part 36 and to be "open for 21 days" was time-limited and therefore not a valid Part 36 offer: C v D [2011] EWCA Civ 646. (Click here for our report of the High Court's decision.)

The Court of Appeal agreed with the High Court that a "time-limited" offer (i.e. one which is open for acceptance for only a limited period) is not capable of being a valid Part 36 offer so will not carry the costs sanctions associated with Part 36 (though the court can still take it into account in exercising its discretion on costs).

However, the court concluded that on its proper construction the offer in this case was not time-limited, despite being expressed to be "open for 21 days". The court noted that this expression can mean either: (i) that an offer cannot be accepted after 21 days; or (ii) that it will not be withdrawn for 21 days. It was common ground that the offer was intended to operate as a Part 36 offer and, since that was inconsistent with it being a time-limited offer, the court was obliged to consider whether there was a reasonable construction which did not involve the offer being time-limited. The court held that, in the context of Part 36, it was entirely reasonable to construe the words "open for 21 days" as meaning (ii) above. The court commented: "an offer presented as a Part 36 offer and otherwise complying with its form will not readily be interpreted in a way which would prevent it from being a Part 36 offer".

Accordingly, the Court of Appeal held that the claimant's offer was a valid Part 36 offer. Since it had not been expressly withdrawn at any point, the defendant's acceptance of that offer (just three and a half weeks before trial) was binding.

This decision highlights a number of practical points:

• Parties should keep Part 36 offers under review and, if their position has improved so that they no longer wish to be bound by an offer, serve written notice withdrawing or varying it (even if the offer was, on its face, expressed to be open for a limited period).
• If a party wishes to make a time-limited offer, it should not be expressed as a Part 36 offer but rather a "without prejudice save as to costs" (or Calderbank) offer.
• Given the potential ambiguity identified by the Court of Appeal, parties should avoid stating that an offer is "open for x days" without clarifying whether the offer will automatically lapse thereafter.