Not all Calderbank offers are created equal – 7 Rules for Drafting Enforceable Calderbank Offers

In construction disputes – where legal costs escalate quickly and project delays can be costly – Calderbank offers are a powerful strategic tool for early resolution and litigation cost management. However, not all Calderbank offers are created equal. To be effective, particularly when seeking to recover costs, a Calderbank offer must be drafted with precision, clarity and intent. A poorly constructed offer may be given little or no weight in costs proceedings.

Before diving into the drafting rules, let’s revisit the fundamentals.

What is a Calderbank Offer?

A Calderbank offer is a written offer to settle a legal dispute, made “without prejudice save as to costs.” It originates from the English case Calderbank v Calderbank [1975][i] and allows parties to negotiate privately without prejudicing their legal position – except when arguing about legal costs after judgment.

In practical terms, if the offer is unreasonably rejected and the opposing party fails to achieve a better result at hearing, the offering party can seek indemnity costs from the date the offer was made.

With that in mind, here are 7 key rules to ensure your Calderbank offer carries legal weight and maximises its intended cost consequences.

Rule 1: Clearly mark the offer “Without Prejudice Save as to Costs”

This label ensures the offer remains privileged during the substantive proceedings but can be disclosed when the issue of costs is determined. To avoid ambiguity, include the phrase prominently – both in the heading and opening paragraph. If this wording is missing or incorrect, the offer may be inadmissible in cost proceedings, undermining its strategic value.

Rule 2: Use precise, clear and unambiguous language

When it comes to Calderbank offers, ambiguity is the enemy of enforceability. As stated in Grabavac v Hart,[ii] the offer must “leave the offeree in no reasonable doubt as to the nature and extent of what is being offered.” The offer must:

• Specify the exact amount offered or set out alternative settlement terms – such as completion of specific works or the granting of releases.
• Identify the claims being resolved – whether it’s a global settlement or limited to a specific issue, such as claims for delay damages or variations.
• Set out any conditions attached to the offer – such as execution of a deed of release, the timeframe for payment, or confidentiality provisions.

This clarity is particularly important in construction disputes, where overlapping claims are common.

Rule 3: Ensure the offer is reasonable and genuine

To be effective, a Calderbank offer must be a genuine attempt to settle, not just a tactical move. Offers that are clearly unrealistic or derisory may be disregarded by a court or tribunal. By contrast, offers supported by expert reports, quantum assessments or commercial analysis are more likely to carry weight and influence cost outcomes.

Rule 4: Include an express statement on costs consequences

Strengthen your position by making the cost implications explicit. For example, include a clause such as the following:

“This offer is made pursuant to Calderbank v Calderbank [1975] 1 All ER 333. In the event that this offer is not accepted and you fail to obtain a more favourable outcome, we will seek indemnity costs.”

This puts the recipient on clear notice and reinforces the seriousness of the offer.

Rule 5: Set a clear and reasonable deadline and acceptance process

The offer should clearly specify:

• A reasonable timeframe for acceptance – generally at least 14 days unless the circumstances justify otherwise. The appropriate duration will depend on factors such as the complexity of the project, the nature of the offer and industry standards. For instance, in Meldov Pty Ltd v Bank of Queensland (No.2) [2015],[iii] a 12-day acceptance period was found to be sufficient.
• The method by which acceptance should be communicated — such as by email, signed acceptance or written confirmation. This ensures that both parties are clear on how and when acceptance is valid.

Clearly setting out these details helps avoid disputes regarding the timing or manner of acceptance, particularly important in time-sensitive construction projects.

Rule 6: Explain why the offer should be accepted

While not mandatory, explaining the rationale behind your offer can help demonstrate its reasonableness. Courts have recognised that where one party clearly sets out why the other will fail, and that offer is unreasonably rejected, it may support an application for indemnity costs. As Lindgren J stated in NMFM Properties Pty Ltd v Citibank Ltd (No 2) [2001],[iv] where His Honour observed:

“…No doubt where a party puts with sufficient particularity to the opposing party the reasons why the latter must fail, yet the latter does not recognise the inevitable, this will be a factor pointing to an award of indemnity costs.”[v]

Importantly, where an application for indemnity costs is made, the burden lies with the applicant to establish that the rejection of the Calderbank offer was unreasonable.[vi]

Rule 7: Retain evidence of service and communication

Always serve the offer in a traceable manner – via email with read receipt, courier or registered post. You should retain copies of:

• The offer letter and any attachments.
• Proof of service.
• Any correspondence or acknowledgements.

These records are critical if there is later a dispute about whether the offer was made, received or properly considered.

Key Takeaway

A Calderbank offer is far more than a procedural step—it’s a tactical instrument for shaping both the outcome and the cost consequences of litigation. In construction disputes, where issues are complex and stakes are high, the value of a well-drafted Calderbank offer lies in its clarity, reasonableness and procedural integrity. Draft it with precision to not only encourage early settlement, but also to protect your client’s position when costs are ultimately determined

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[i] 1 All ER 333.

[ii] [1997] 1 VR 154 per Winneke P at 155.

[iii] NSWSC 2015.

[iv] FCA 480; (2001) 109 FCR 77.

[v] Ibid., per Lindgren J at 87.

[vi] MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 240 per Lindgren J; Sural Spa v Downer EDI Rail Pty Ltd [2007] NSWSC 1292 at 8 per Einstein J.