Without prejudice is a legal term whose meaning, in essence, is "without injury" or "without loss" to the legal standing of a party to litigation. The courts use "without prejudice" during dismissal of legal proceedings, and parties to litigation often utilise it when negotiating the settlement.
Use At Dismissal
The court sometimes will dismiss a case on a "without prejudice" basis, making no final judgment or comment on the validity of the plaintiff's claim or legal standing. If the court dismisses a case in this manner, the plaintiff can pursue the action again without detriment to his argument.
A dismissal "with prejudice" would constitute a res judicata judgment, meaning the case has received a judicial determination. The plaintiff then loses his right to bring the case to court again.
Without Prejudice Correspondence
Many parties to litigation will attempt to negotiate a compromised settlement, either during proceedings or prior to filing a claim. Written and verbal admissions sometimes occur during these negotiations, in an attempt to bring the parties closer to an amicable settlement. It is standard practice during negotiations to mark such correspondence "without prejudice." It cannot be used subsequently in court to embarrass a party or weaken her position.
Parties negotiating on a "without prejudice" basis can be confident that any genuine admissions they make will not be raised in court if negotiations fail. This encourages parties to settle disagreements out of court, which saves court costs, legal fees and time.
The court will not treat all documents that are marked "without prejudice" that way. When there is a clear absence of any genuine attempt at settlement in a "without-prejudice" letter, the court may rule it admissible as evidence. Marked correspondence containing the terms of the parties' negotiated agreement can be introduced in court should the two sides have a conflict over the terms.
The court might deem admissible, even if they don't have a "without-prejudice" mark, letters that could provide a clear indication of perjury. The court is entitled to see marked correspondence that contains blackmail or another abuse of the system---for example, correspondence confirming that a party has lied in filed court documents. The court also might choose to admit into evidence correspondence that shows clear misrepresentation or fraud by a party during a settlement negotiation process that led to a final agreement.