Without prejudice save as to costs (Calderbank): definition and how it works

In plain terms

Two related privileges sit behind the phrase. “Without prejudice” protects genuine settlement communications: what parties say while trying to settle cannot be put before the court as an admission if the talks fail. Adding “save as to costs” carves out a single exception. The letter stays privileged and invisible to the judge deciding the substantive dispute, yet it can be produced after judgment, when the court exercises its discretion on costs.

The technique takes its name from Calderbank v Calderbank [1976] Fam 93, in which the Court of Appeal recognised that a party could make a protected offer and still rely on it when costs were assessed. The practical effect is a costs trap for a party who refuses a fair offer. If the offeror ends up beating its own offer at trial, meaning the outcome is at least as good as what it proposed, it hands the Calderbank letter to the court and asks for an adverse costs order against the opponent from the date the offer should have been accepted.

In the civil courts of England and Wales, the formal, codified version of this tactic is a Part 36 offer, which carries near-automatic costs and interest consequences under the Civil Procedure Rules. A Calderbank offer is the more flexible, discretionary cousin: it is widely used in family proceedings, in arbitration, and in any negotiation where Part 36 does not apply or where a party wants terms Part 36 cannot express.

Why it matters in a contract

Commercial contracts rarely use the phrase, yet it shapes what happens when a contract is breached and the dispute heads toward litigation or arbitration. A well-timed without prejudice save as to costs offer lets a party cap its exposure: even if it cannot avoid liability, it can shift the costs burden onto an opponent who held out for more and failed.

Two drafting points follow. First, a dispute resolution or arbitration clause can expressly preserve the parties’ right to make Calderbank offers, which matters because an arbitral tribunal draws its costs powers from the agreement and the applicable rules. Second, the label itself carries weight: marking correspondence “without prejudice save as to costs”, rather than a bare “without prejudice”, is what keeps the costs door open. Getting the wording wrong can either waive the protection or lock the letter away from the court entirely.

Knowing your true exposure before you name a figure is essential, because the offer only works if it is realistic. Pactolane’s exposure analysis helps quantify what a contract puts at risk, which informs the number a party is willing to put in the letter.

Example

A supplier sues a customer for GBP 100,000 in unpaid invoices. Three months before trial, the customer writes “without prejudice save as to costs” offering GBP 85,000 in full settlement. The supplier refuses and presses on. At trial the court awards the supplier only GBP 70,000. The customer produces the Calderbank letter and argues that, from the date the offer expired, the supplier should have accepted, so every subsequent cost was wasted. The court, exercising its discretion, may order the supplier to pay the customer’s costs from that date, wiping out much of the GBP 70,000 recovered.