Part 36 of the Civil Procedure Rules 1998 and its practice direction deals with payments into court in satisfaction (Part 36 payments) and offers to settle (Part 36 offers).

A Part 36 payment or offer may be made at any time after the commencement of proceedings and may be made in appeal proceedings.Generally, an offer to settle a money claim must be backed up by a Part 36 payment.

In mixed claims, the defendant must make a Part 36 payment in respect of the money claim and a Part 36 offer in respect of the non-money claim, and must make this clear, if the offer as a whole is to have costs consequences.

Also a claimant may make an offer to settle his or her own claim.Offers and noticesA Part 36 offer is treated as 'without prejudice except as to costs'.

It must be in writing, signed by the offeror or legal representative.

It must state that it is a Part 36 offer, that it relates to the whole of the claim or to one or more specified parts of it or issues arising in it - if this is the case - that it does not include interest and, if it does not, whether any and if so what interest is offered in addition.

It must state whether it takes into account any counterclaim, and if it may be made by reference to an interim payment.

It may accept a specified proportion of liability.

If it is backed by a Part 36 payment, a payment notice must be filed in court, containing similar information.

Additional information is required where the recoupment of benefits provisions apply and where provisional damages are sought.All or part of the money paid into court by a defendant as a condition of an order may be treated as a Part 36 payment by filing a Part 36 payment notice.The court will serve the notice unless the offeror informs the court when making the payment in that it has been served.Offers before proceedingsThere are new rules relating to offers made before commencement of proceedings.

Such an offer will be taken into account by the court when making an order for costs if the offer is expressed to be open for at least 21 days after the date it is made.

If made by the potential defendant, it must include an offer to pay the costs of the offeree for the period up to 21 days after it is made.

It must generally comply with Part 36.Additionally, if the claim is a money claim, the offeror must make a Part 36 payment of a sum not less than the offer, within 14 days of service of the claim form.Clarification, pleaseA Part 36 payment may not be reduced or withdrawn without the court's permission.

It may of course be increased, when a notice of increased payment must be filed and served.A Part 36 offer, or any variation, or a Part 36 payment, or any increase, is effective when the offer or notice of the payment or increased payment is received by the offeree.The offeree may request clarification of a Part 36 payment or offer within seven days of its being made.

If clarification is not forthcoming, the offeree may apply to the court for a clarification order unless the trial has started.

A clarification order will specify the date when the Part 36 payment or offer is deemed to be made.Check your diaryAcceptance of a Part 36 payment or offer is effective when notice of a cceptance is received by the offeror.If the offer is made 21 days or more before the start of the trial, it remains open for a period of 21 days from the date it is made; thereafter, or if it is made less than 21 days before the start of the trial, the offeree may only accept it if the parties agree liability for costs.

If there are other defendants sued jointly, or in the alternative, against whom the claim is discontinued, they must consent in writing.

(The claimant may continue against other defendants sued as severally liable.)If these conditions are not met, the offer can be accepted only if the court gives permission.

The court's permission to accept a Part 36 payment or offer will always be required where a claim is compromised on behalf of a child or patient.When exercising its general discretion on costs, the court must take into account a payment or offer which is not made in accordance with Part 36.

This would include a late payment in.Costs on acceptanceWhere a Part 36 payment or offer is accepted without the need for the court's permission and, if appropriate, the balance of the claim is abandoned and the court does not order otherwise, the claimant will be entitled to his or her costs of the proceedings up to the date of service of the notice of acceptance (including any costs attributable to the defendant's counterclaim if the Part 36 payment or offer states that it takes it into account).

Where permission is granted after the trial has started, the court must at the same time deal with the whole of the costs of the proceedings.Beware...Where at trial a claimant fails to obtain more than a Part 36 payment or a more advantageous judgment than a defendant's Part 36 offer, the claimant will be ordered to pay the defendant's costs incurred after the latest date for acceptance of the payment or offer, unless the court considers this to be unjust.What is new is that, where at trial a claimant obtains more than his own Part 36 offer, the court will, unless it considers it unjust to do so, allow interest on the amount of the judgment at no more than 10% above the Bank of England base rate, and allow indemnity basis costs for some or all of the period following the latest date on which the claimant could have accepted.In considering whether it would be unjust, the court will take into account the terms of any offer, the stage in the proceedings, and the information available when the offer or payment was made and the conduct of the parties in making or not making available information for the purpose of evaluating the offer.

EnforcementWhere an offer which is accepted relates to the whole or part of a claim, the claim - or the relevant part - is stayed upon the terms of the offer, which may be enforced without the need for a new claim.

Alternatively, a party may treat failure to comply with the terms of an accepted offer as a breach of contract, and pursue a contractual remedy within the same proceedings.

Where the acceptance relates to part of a claim (the remainder not being abandoned), the claim will be stayed as to that part and the court will decide the liability as to costs unless the parties agree.An order for payment out is required where the court has to approve the terms of settlement or give permission to accept the Part 36 payment or offer, or where the defendant has made the payment so that he or she may rely on the defence of tender.

Unless the parties agree otherwise, when making an order for payment out, the court will order that interest accruing up to the date of acceptance will be paid to the offeror, and interest accruing thereafter will be paid to the offeree.