By using the phrase ‘Without Prejudice’ at the top of all such communication will prevent the use of communications in evidence until a contract is in place to settle the dispute. The documents / communication will be privileged from being produced if legal proceedings are required. But once agreed terms are in place they will be bound, even if headed ‘without prejudice’ unless also headed ‘subject to contract’ (or it is clear that some other type of formalities is also required.

The courts have held, however, that the principle of “Privilege” can protect subsequent and even previous letters in the same chain of correspondence. Strictly speaking, therefore, it is not necessary that every letter be marked “Without Prejudice” if it is clear that the communication is intended to be part of the settlement negotiations. But to be sure it is recommended that you add such headings.

 “Without Prejudice” correspondence remains “Privileged” even after a compromise has been reached and is generally inadmissible in any subsequent litigation on the same subject matter whether between the same or different parties. However, where the negotiations are successful and the “Without Prejudice” correspondence constitutes a binding contract the correspondence may be produced to prove that such a contract has been entered into (if, say, one party does not comply with the terms of the settlement, and the other wishes to enforce it).

Note; Consider using ‘Without Prejudice’ on all communications, this includes emails and text message as well as formal letters and documents.