Settling litigation strategically: practical guidance for resolving a dispute

A successful outcome in litigation is not always a judgment in your favour. It may be a settlement that recovers money sooner, limits your exposure, protects a valuable relationship, or allows you to move on without further uncertainty.

The challenge is knowing whether an offer represents a sensible compromise. That requires more than comparing it with the amount claimed. The strength of the evidence, future legal costs, disruption, and prospects of enforcing a judgment all affect what a dispute is realistically worth.

Settlement should therefore be considered throughout a case. A clear strategy helps you decide when to negotiate, what terms to seek, and when continuing proceedings remains justified.

If you are considering a settlement offer or reviewing your options in a dispute, contact our litigation solicitors for advice on the risks and next steps.

1. Be clear about your objectives

Before bringing or defending a claim, establish what you want to achieve. Recovering money may be the immediate priority, but other outcomes can matter just as much: securing repairs, bringing an agreement to an end, protecting property rights, or preserving a business relationship.

Those objectives should guide your approach to settlement. A payment offer may resolve the financial claim while leaving the underlying problem untouched. Equally, a negotiated agreement may deliver something useful that a court would not ordinarily order.

Your assessment should bring together five questions:

• What evidence supports your position, and where are the weaknesses?
• What is the claim or defence realistically worth?
• What further costs will be needed to pursue it?
• If you obtain a judgment, can the other party pay or comply?
• How will continuing the dispute affect your business, investments, or personal priorities?

Distinguish between your preferred outcome and the minimum terms you could reasonably accept. This provides a basis for negotiation while allowing you to reassess as the evidence develops.

2. Calculate the true cost of proceeding

The amount claimed is only one part of the financial picture. A settlement should be compared with the likely net outcome of continuing, allowing for the risks and spending still ahead.

For example, a claimant offered less than the full value of a claim may initially regard the proposal as inadequate. However, if obtaining a judgment requires substantial further expenditure, takes many months, and leaves uncertainty about payment, the offer may deserve closer consideration.

The same reasoning applies to a defendant. A settlement may be commercially sensible even where there are credible grounds to defend the claim, particularly if the cost and disruption of establishing that defence would be substantial.

Relevant costs include solicitors’ and barristers’ fees, court fees, expert evidence, and trial preparation. There may also be significant demands on your time, including locating documents, preparing witness evidence, and attending hearings.

The court has discretion over costs. Although the general rule is that the unsuccessful party pays the successful party’s costs, the outcome can be affected by conduct, settlement offers, and the rules applicable to the claim. Winning does not necessarily mean recovering everything spent.

Costs already incurred remain relevant to the overall outcome, but they should not become the sole reason to continue. At each stage, ask what further spending is justified by the result you can realistically achieve.

3. Understand how Part 36 offers affect your position

A Part 36 offer is a formal settlement offer made under the Civil Procedure Rules. Both claimants and defendants can use it, and it can significantly change the financial risks of continuing litigation.

Its importance lies in the potential consequences if the offer is not accepted and the case proceeds to judgment. Those consequences differ depending on which party made the offer and how the judgment compares with it.

For example, a claimant who fails to obtain a judgment more advantageous than a defendant’s Part 36 offer may face an adverse costs outcome for the period after the offer’s relevant acceptance period expired. A claimant who obtains a judgment at least as advantageous as their own offer may receive enhanced costs and other financial benefits, subject to the applicable rules.

A Part 36 offer therefore needs careful assessment even if its headline amount seems unattractive. The question is also what accepting or rejecting it could mean for costs, interest, and the overall result.

Timing matters. An early offer can create an opportunity to resolve the dispute before significant costs accumulate, but it must be informed by a sensible assessment of the available evidence. Offers should be reviewed as the case develops.

Part 36 has detailed requirements and exceptions. Take advice before making, accepting, rejecting, or withdrawing an offer. An ordinary settlement proposal does not automatically carry the same consequences.

4. Use mediation and other forms of alternative dispute resolution

Mediation gives parties an opportunity to negotiate with the assistance of an independent mediator. The mediator helps explore possible solutions but does not decide who wins.

It can be useful in commercial landlord and tenant disputes, contractual and unpaid invoice claims, property damage and professional negligence disputes, and shareholder disagreements.

For a closer look at the process and its benefits, read our guide to why mediation works for resolving business disputes.

One advantage is flexibility. A court claim may focus on a financial remedy, while a negotiated settlement could include payment by instalments, agreed repairs, changes to contractual arrangements, or an orderly end to a business relationship.

For example, a property dispute might be resolved through an agreed programme of works and access arrangements. That may address the practical problem more effectively than continuing to argue solely about compensation.

Preparation is important. Parties should understand the evidence, likely costs, and terms they could accept. Anyone attending on behalf of a company or organisation should have appropriate authority to negotiate and agree a settlement.

ADR also forms part of the court’s management of proceedings. Courts can order parties to engage in ADR, and a failure to comply with an order or an unreasonable failure to engage may affect costs. An invitation should therefore receive a considered response, even where you believe your case is strong.

5. Make sure the settlement is clear and enforceable

Agreeing a figure does not resolve every issue. The settlement must clearly record what each party has agreed to do, which claims are being resolved, and what happens if the terms are breached.

Payment terms should specify the amount, deadline, and treatment of interest and legal costs. Where instalments are agreed, consider what protection is needed if a payment is missed.

Other obligations need equal care. If the agreement involves repairs, delivery of documents, or changes to a contract, the required actions and timescales should be sufficiently precise to avoid another dispute.

The written terms should address:

• Which claims and counterclaims are being released.
• Who is bound by the settlement.
• Any confidentiality provisions or continuing obligations.
• The consequences of non-payment or other breaches.
• How existing court proceedings will be ended or stayed.

The appropriate form may be a settlement contract, consent order, or Tomlin order, depending on the circumstances. These are not interchangeable, and the choice can affect how the terms are enforced.

Where payment is delayed, assess the other party’s ability to meet its commitments. An agreement to pay more over time may offer less practical value than a smaller payment received promptly, particularly if there is a significant risk of default.

6. Negotiate at the right time

Settlement should remain under review throughout a dispute. The right moment may arise before proceedings begin, after important documents are disclosed, or once witness or expert evidence clarifies the risks.

Each stage can change the balance. A document may strengthen your position, an expert may identify a weakness, or information about the other party’s finances may alter the prospects of recovery.

Review both the legal position and the work still ahead. If substantial costs are about to be incurred, it may be sensible to explore whether an offer or mediation could resolve matters first.

Negotiating early can save money, but agreeing terms before essential facts are understood may mean giving away too much or accepting obligations that have not been properly assessed. Waiting until trial approaches can also reduce the financial benefit of settlement because much of the expenditure has already occurred.

A practical approach is to agree review points with your solicitor. At each one, consider the evidence, likely outcome, remaining costs, and whether an existing offer should be accepted, revised, or replaced.

Exploring settlement does not require you to abandon preparation for trial. Negotiations and court preparation can proceed alongside one another, with deadlines and procedural obligations continuing unless formally changed.

Expert advice on settling litigation

A sound settlement strategy brings together the merits of the case, the financial risks, your objectives, and the practical value of the terms offered. It also recognises when continuing proceedings is necessary to protect your position.

Michael Mulcare, consultant litigation solicitor at SO Legal, comments:

“The amount offered is only part of the assessment. You also need to consider what it will cost to continue, how the evidence may develop, and whether the other party can pay. A settlement should be judged against the realistic alternatives, rather than the outcome you hoped for at the start. Engaging a litigation specialist early can help you assess those options, identify gaps in the evidence, and plan when to negotiate before substantial further costs are incurred.”

Our litigation solicitors advise on settlement throughout a dispute, including assessing offers, using Part 36, preparing for mediation, and documenting enforceable agreements.

If you are considering an offer or reviewing whether to continue a claim or defence, contact our team to discuss your options before committing to the next stage.