Without Prejudice Letter Example In Australia

Disputes happen in business, even when you do everything right. Maybe a supplier missed a deadline, a client disputes an invoice, or a collaboration didn’t go to plan.

When you’re ready to negotiate a commercial outcome, a “without prejudice” letter can help you speak openly and try to settle the matter without making things worse if it later goes to court.

In this guide, we’ll explain what “without prejudice” means in Australia, when to use it, how to write the letter step-by-step, and provide a copy-paste without prejudice letter example you can adapt for your situation.

What Does “Without Prejudice” Mean In Australia?

“Without prejudice” is a legal label used on communications made for the genuine purpose of settlement. The general rule is that those communications can’t be used as evidence against you in court if settlement talks fail.

In other words, it creates a “safe space” to negotiate. You can put forward commercial offers, explore options, or acknowledge issues, without those words automatically being held against you later.

If you want a deeper dive into the concept and its limits, see our plain-English overview of without prejudice.

Key principles to keep in mind

• Genuine settlement purpose: The protection applies only if the communication is made to resolve a dispute.
• Context matters more than the label: Adding “Without Prejudice” helps, but courts look at the purpose and content, not just the heading.
• Exceptions exist: For example, where there’s “unambiguous impropriety” (like blackmail) or to resolve costs issues (“without prejudice save as to costs”).

“Without prejudice save as to costs”

Sometimes you’ll see “without prejudice save as to costs”. This allows the court to see the offer later only to decide who pays legal costs if the matter proceeds. It’s often used with formal settlement offers.

When Should Your Business Send A Without Prejudice Letter?

You don’t need a dispute to escalate into a lawsuit before you negotiate. In fact, early negotiation is usually cheaper and better for business relationships.

Common scenarios where a without prejudice letter can help include:

• Unpaid invoices or scope disputes with clients.
• Delivery delays or quality issues with suppliers.
• Disagreements over contract obligations or milestones.
• Exit discussions with a reseller, distributor or collaborator.

If you think there’s been a breach of contract, it’s smart to understand your position and remedies before writing. Our guide to breach of contract explains what a breach looks like and your options under Australian law.

When not to use it

• Routine operational emails (e.g., scheduling, logistics) that aren’t about resolving a dispute.
• Communications you’ll need to rely on later as “open” statements (for example, a clear demand giving notice under the contract).
• Where there’s no genuine intention to negotiate a resolution.

How To Write A Without Prejudice Letter (Step-By-Step)

Here’s a simple structure you can follow. Keep it professional, factual and solution-focused.

1) Use a clear heading and subject

Place “Without Prejudice” at the top of the letter and in the subject line. If appropriate, consider “Without Prejudice Save As To Costs” for formal offers.

2) Identify the dispute and parties

State who you are, who you’re writing to, and the contract or project the dispute relates to (include dates and reference numbers).

3) Summarise the key facts (without argument)

Set out a brief, neutral timeline of what happened. Avoid inflammatory language or admissions. Stick to dates, deliverables, and references to the contract or correspondence.

4) Outline your position and commercial concerns

Say why you’re concerned and how it impacts your business (e.g., cash flow, delivery schedules, downstream commitments). Keep it measured and businesslike.

5) Make a practical proposal

Offer a commercial way forward. Examples include a payment plan, partial refund, scope variation, replacement goods, or mutual termination with agreed terms. If you propose settlement, make it conditional on signing a formal Deed of Release and Settlement.

For context on the document that finalises settlement terms, see our guide on creating a Deed of Release and Settlement and our Deed of Settlement service.

6) Invite a response and set a timeframe

Ask the other party to respond by a reasonable date. This keeps momentum and helps avoid drawn-out exchanges.

7) Keep it professional and consistent with your contracts

Make sure your proposal aligns with any notice and variation clauses in your contract. If you end up varying the contract instead of settling, review our guide to contract variations.

8) Consider a “without prejudice” and an “open” version

It’s common to send two communications:

• An “open” letter (not marked without prejudice) that records factual matters or gives formal notice required by the contract.
• A “without prejudice” letter making your settlement offer.

Separating them helps preserve your position if negotiations fail.

Without Prejudice Letter Example (Copy-Paste Template)

You can adapt the example below to your situation. Always check it against your contract and be mindful of the facts. Where needed, get advice so your position is protected.

WITHOUT PREJUDICE

Subject: Without Prejudice - Proposal To Resolve 

Dear ,

We write regarding , dated , between  and .

Background
• On ,  and  entered into .
• The agreed scope included , with milestones/delivery dates of .
• On , .
• On , we raised concerns about , and on , you responded .
• As at today, .

Our Position
Without making admissions and reserving all rights, our primary concerns are:
• .
• .
• ; this has not been met.]

Commercial Proposal (Without Prejudice)
In the interests of resolving this matter promptly and preserving our business relationship, we propose:
•  in full and final settlement]; or
•  fortnights, commencing ]; or
•  by , with invoice #123 cancelled].

Any settlement would be subject to the parties signing a Deed of Release and Settlement on terms acceptable to both parties, including mutual releases and confidentiality.

Next Steps
Please let us know by  whether you accept this proposal in principle, or if you wish to discuss alternatives. We are available to meet or arrange a call this week.

To be clear, this letter is made on a without prejudice basis for the purpose of genuine settlement discussions. We reserve all rights.

Kind regards,

 | 

Optional “save as to costs” version

If you want the court to consider your offer later when deciding legal costs only, you can label the letter “Without Prejudice Save As To Costs”. The substance is otherwise similar, but used more cautiously when litigation is on foot.

Common Mistakes To Avoid

Even experienced teams can slip up. Here are traps to watch out for.

Relying on the label alone

If the content isn’t a genuine attempt to settle, the “without prejudice” label won’t protect it. Always keep the purpose clear and stick to settlement-focused language.

Admitting fault unnecessarily

You don’t need to make legal admissions to negotiate. Use neutral, factual wording and say you reserve your rights.

Mixing “open” and “without prejudice” content

Don’t blur the lines. Keep any formal notices or demands in a separate “open” letter. Use the without prejudice letter purely for negotiation.

Forgetting the contract mechanics

If you’re proposing a variation instead of a clean settlement, check the notice, waiver and variation clauses. If a formal variation is needed, get it documented properly (for example, via a Deed or Amendment). If you’re heading towards a final settlement, our overview of what a Deed is will help you understand why settlements are often documented as deeds.

Being too vague or too aggressive

Vague proposals stall negotiations; aggressive ones can escalate the dispute. Clear, practical offers with realistic timeframes get the best results.

Not sense-checking legal risk first

Before you propose settlement, review your legal position and documents (purchase orders, emails, SOWs, contract terms). A quick contract review can help you calibrate your strategy and decide what’s reasonable to offer or request.

What Happens After You Send The Letter?

Most disputes resolve through a few rounds of negotiation. Here’s how to manage the process professionally.

1) Keep a clean record

Maintain a folder for settlement communications. Separate “open” correspondence from “without prejudice” material so it’s clear what can be relied on later.

2) Explore alternatives openly

Be flexible. Trade-offs (e.g., a partial credit plus future work) often get deals over the line faster than all-or-nothing stands.

3) Use a Deed of Release and Settlement

Once you reach in-principle agreement, document it in a Deed so the terms are binding, clear, and enforceable. Typical terms include payment dates, releases of claims, confidentiality, non-disparagement, and consequences of non-payment. If you’re new to these documents, review our practical guide to Deeds of Release and Settlement or speak to us about a tailored Deed of Settlement.

4) Consider variations if you’ll continue working together

If you’ll keep the relationship going (e.g., supplier and buyer), a contract variation may be more appropriate than a full release. Get it in writing and make sure it’s executed correctly. Our guide to amending contracts explains the key points.

5) Get help for tough negotiations

High-stakes or complex matters benefit from support. A short burst of negotiation support can help pressure-test your offers, refine your letter, and avoid missteps that lock you into a bad position.

FAQs: Quick Answers For Busy Business Owners

Do I have to put “Without Prejudice” in the subject line?

It’s best practice to put it in both the subject and at the top of the letter. The label isn’t everything, but it helps show intent.

Can I send my without prejudice letter by email?

Yes. Email is fine-just include the “Without Prejudice” wording prominently. If the matter is sensitive, consider a PDF attachment with the heading on the first page.

What if the other side quotes my without prejudice letter back to me?

Politely note the communication is without prejudice and not admissible (subject to limited exceptions). If needed, take advice on how to respond.

Should I make my first offer “save as to costs”?

Usually, you start with ordinary without prejudice communications. “Save as to costs” is used more formally when litigation is underway or imminent. If you’re unsure which approach to take, get quick advice first.

What if we agree to new terms instead of settling?

Use a clear written variation or a new agreement. Don’t rely on loose email threads. If any doubts remain, consider documenting the outcome in a deed to close off existing claims.

Key Takeaways

• “Without prejudice” letters let you negotiate a commercial outcome without those settlement discussions being used against you later, provided the purpose is genuinely to settle a dispute.
• Use a clear, professional structure: heading, brief facts, your position, a practical proposal, and a reasonable timeframe for response.
• Keep formal notices and factual records “open” and send settlement offers in a separate “without prejudice” communication.
• Once you reach in-principle agreement, document it properly-usually in a Deed of Release and Settlement-so it’s binding and enforceable.
• Avoid common traps like mixing open and protected statements, making admissions, or ignoring your contract’s variation mechanics. A short contract review can save time and cost.
• If a dispute involves potential breaches or complex obligations, ground your strategy in your legal position first-start with a quick refresh on breach of contract basics and consider targeted negotiation support.

If you’d like a consultation on drafting a without prejudice letter or finalising a settlement for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.