When to use it.
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The term ‘without prejudice’ is designed to allow conflicted parties to negotiate without fear, that concessions made, will be taken as an admission of culpability and therefore might harm their legal position if the dispute is not resolved.
Parties involved in a dispute each state their point of view and why they are right. This might then be carried on by solicitors, ultimately ending in legal submissions before a court.
However, settlement negotiations may also take place at some point. There the parties need to be able to speak to each other more openly, softening their stance on certain issues, offering concessions in order to reach agreement and avoid the need for a full blown argument in court. In doing so they must not concede any part of their claim that could seriously damage the case should it go to court. Therefore any negotiations are carried on ‘without prejudice’ to the matters that will be argued in court.