In 2025, around 28 percent of UK businesses reported that late payments were affecting their financial stability. This figure represents well over a million companies facing slow or missing payments, according to the Small Business Commissioner’s research. For many owners, that means long delays, gaps in cash flow, and missed working hours spent chasing overdue invoices rather than running the business. 

It is no surprise that more organisations now turn to debt collection or outsourced credit control when invoices drag on.

If you have ever tried to resolve a payment dispute, you will know how tense conversations can become. You want to keep things professional while still trying to find a practical way forward. This is where the phrase without prejudice can become very useful. 

It creates a space where both sides can talk more openly about settlement ideas, without worrying that anything said will be used against them later. 

Without Prejudice: How It Works, Common Mistakes and When To Use It

What Does Without Prejudice Mean?

The phrase “without prejudice" is used when someone wants to negotiate a settlement while protecting their legal position. If a message or conversation is genuinely about settling a dispute, marking it as without prejudice means it normally cannot be shown to a court. This encourages both sides to speak more freely and consider compromise.

For it to take effect, there must be a real dispute. It cannot be used on everyday emails or routine conversations. The communication must be clearly connected to an attempt to settle the disagreement.

You will often see the label used in business disputes that involve unpaid invoices, disputed contract terms or settlement negotiations that run alongside debt collection or outsourced credit control work.

When Should You Use Without Prejudice?

The phrase is normally added to letters, emails or spoken conversations when someone is trying to settle a dispute. By using it, you indicate that the communication cannot later be used as evidence. This matters because it allows you to discuss settlement ideas without weakening your position if the negotiation fails and the dispute ends up in court.

To show why this is important, consider the following example.

Imagine you have supplied goods to a customer. You assessed them as a reasonable credit risk and decided to offer them a credit account. They accepted your terms, which included paying within thirty days of delivery. Despite this, they failed to pay. You have chased them several times, and you have added late payment interest and compensation, which the law allows.

After many excuses, the customer replies to say that they will pay you the original invoice amount, but only if you agree to drop the interest and compensation. You are tired of the dispute and would rather focus on running your business. In fact, this situation is exactly the kind of problem you could pass to a debt collection service next time. 

For now, you decide that accepting the basic amount without the interest is better than continuing a long argument.

If you write back accepting their offer and they still do not pay, then end up in court, your letter could be shown as evidence. The customer could argue that you have already agreed not to pursue the interest. By marking your response as WITHOUT PREJUDICE, you prevent this. It makes it clear that the offer is only being made to try to settle the matter and is not an admission that you accept a lower amount in law. You keep the right to pursue the full amount later.

The same rule applies to conversations. If you call a customer and say at the start, “This conversation should be treated as without prejudice”, then the protection usually applies.

Without Prejudice Save as to Costs

Sometimes you will also see the phrase Without Prejudice Save as to Costs. This version of the phrase allows the communication to remain private during the dispute but lets the court look at it later when deciding costs. It can show that one party behaved reasonably during negotiations.

Pros and Cons of Using Without Prejudice

Using the phrase can help both sides talk more freely because they know their words will not be used against them if negotiations fail. It can allow room for compromise and make it easier to reach a conclusion without long and expensive disputes. It also means you can test ideas without signalling that you accept any legal weakness.

The main drawback is that the label only works when there is a genuine dispute and a clear attempt to settle it. If the communication is not truly about settlement, the protection does not apply even if the label is used. Anyone who misuses the phrase risks losing the protection and may weaken their position.

The Difference Between Open, Without Prejudice and Protected Conversations

• Open communication can be shown to a court whenever needed. 
• Without prejudice communication cannot normally be used. 
• Protected conversations are used in employment settings and follow their own rules. 

People often assume that a conversation described as private or off the record carries the same protection, but these phrases do not have any legal.

When to Use Without Prejudice

Use the phrase when you are discussing settlement terms in a genuine dispute, for example, when negotiating payment after missed deadlines, when dealing with a difficult supplier or when discussing a complaint that has escalated. It is also common when businesses are trying to resolve unpaid accounts, either directly or through debt collection or outsourced credit control partners.

Businesses commonly use the phrase in disputes about unpaid invoices, contract disagreements, quality or delivery issues, employment settlements or any situation where both sides want to reach agreement without weakening their legal position.

Courts look closely at the context rather than the label alone. If a message is clearly aimed at negotiating settlement, the protection may still apply even if the label has been forgotten. Even so, it is sensible to include the words each time to avoid confusion.

To be treated as without prejudice, the message must relate to a dispute and show that the sender is making an offer or a proposal to bring it to an end. Messages that mix ordinary business discussion with settlement comments can lose protection, so it is helpful to keep settlement messages separate.

Misuse of the Without Prejudice Label

Some businesses label routine letters or emails as without prejudice even when no dispute exists. Others include threats or unrelated information in the same message. When this happens, the court may reject the protection. Misuse can be risky.

Common mistakes include failing to use the label at the start of a settlement conversation, mixing factual comments with settlement proposals and using the phrase too early or too often. Another error is assuming the phrase protects behaviour that would not otherwise be acceptable. The protection applies only to genuine settlement discussions.

Avoid using it in day to day conversations where there is no dispute. It will not protect the communication and may cause confusion.

Without Prejudice Conversations

Verbal discussions can be treated the same way as letters or emails provided that someone states clearly at the start that the conversation should be considered without prejudice. It is helpful to follow up with a note or message confirming the discussion.

Without Prejudice Letters

A letter should include the phrase at the top and should stick to the settlement proposal. Avoid including unnecessary information that is not part of the negotiation. Keeping settlement letters separate from ordinary correspondence prevents confusion.

Without Prejudice and Subject to Contract

Adding “subject to contract” makes it clear that nothing is agreed until a formal contract is signed. It prevents accidental agreements during early discussion.

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How MCC Can Help

Many disputes arise simply because unpaid invoices have gone unnoticed for too long. Our debt collection team can step in quickly to recover overdue amounts, leaving you free to focus on your business. Our outsourced credit control service can help prevent disputes happening in the first place by keeping your ledger running smoothly and reducing the chance of long delays.

Using Without Prejudice in Business Disputes

In conclusion, using without prejudice in the right way can help you settle disputes faster and with less stress. It gives you a safe space to talk about settlement ideas without affecting your legal position. 

The phrase should be used only when a genuine dispute exists and only when you are trying to reach agreement. Keeping settlement discussions separate from everyday communication helps avoid misunderstandings. When combined with clear processes for debt collection and outsourced credit control, it becomes a practical tool that supports better outcomes and stronger business relationships.

If you would like support recovering overdue invoices or improving your credit control systems, My Credit Controllers is ready to help.