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What Is a Letter Of Demand?
Andrew Byrnes Law Group • Apr 09, 2020
Letters of demand are an important step in the debt recovery and civil litigation process.
Letters of demand are a more formal way to inform a party of the following:
- that you are seeking to recover money owed to you or your business;
- that you are claiming compensation for a breach of a contract or for the provision of a defective good or service; or
- that you require performance of a contractual obligation.
While there are clear benefits to sending a letter of demand, there are also some practical aspects and consequences of sending a letter of demand that you should be aware of. As such, it’s important for you to know when and how to send an appropriate letter of demand.
Breaking down a Letter of Demand
If you are sending a letter of demand to recover a debt owed to you, it’s important to be aware that debt recovery can be a sensitive issue as many people are uncomfortable talking about money, and this may be particularly so during these uncertain times we are having in early 2020 due to COVID-19.
Since a letter of demand is the usual last step someone takes before commencing legal proceedings, you may want to try exhausting all other alternatives before resorting to this option. After all, if you are a business and another vendor you do business with owes you money, sending a letter of demand may very well ruin your business or personal relationship with the debtor.
As such, before sending a letter of demand, it could not hurt to try to obtain payment or the remedy you seek via phone calls or emails beforehand to the other party. If the other party refuses to remedy the wrong or avoids payment however, it’s time to consider whether you should send them a letter of demand.
In this article, we’ll be breaking down the basics of a letter of demand. You’ll learn why they’re necessary in certain cases, what is included, and what happens afterwards.
Why send a letter of demand?
A letter of demand plays an important part in debt recovery and civil litigation because it offers the recipient of the letter one final chance to take action and prevent the issue from going any further. It is not a mandatory step to take before commencing legal proceedings, but you’d be wise to do so, as it may be that the more formal demand resolves the issue before you embark on the potentially costly endeavour of litigating the issue at Court.
In most instances, a letter of demand is used when a debtor has failed to pay money owed. However, they can also be used when goods or services you paid for did not meet the standards promised, as well as when a party to a contract breaches the contract and you seek a remedy due to that breach.
Whether you are seeking a refund, specific performance of a contractual obligation, or monetary compensation for a breach of contract, a letter of demand is a tool to request a party to meet their legal obligations before you take legal action in a Court or Tribunal.
What is included in a letter of demand?
Outlining your expectations clearly and concisely is crucial in a letter of demand. For example, in a debt recovery situation, you would generally include the following:
- Amount owed, some background explanation of owed amount and supporting calculations of owed amount;
- Evidence of any previous payment agreements;
- Deadline for payment;
Include supporting documents when relevant and ensure that the recipient is provided with ample information to make your demand clear.
What happens after a letter of demand is delivered?
Upon receiving your letter of demand, there are a few different ways the recipient may respond.
Ideally, the formal letter will prompt the recipient to take the action you seek and they will arrange payment or rectification of the situation. However, they may also deny owing you money, request additional information, negotiate, ask to go to mediation, or not act at all.
You will then have to decide whether you want to take a step forward and pursue legal action.
Should I settle my dispute another way?
Since a letter of demand is usually treated as the final warning prior to commencing legal proceedings, it can damage a business or personal relationship past the point of it being repairable. If keeping the business relationship intact is important to you, you may want to consider settling your dispute in another way, such as by sending reminder letters or phone calls to try and reach a resolution. These are ways to show the other party you are giving them the benefit of the doubt just in case they genuinely forgot or were unable to pay you back at the time. Their response will help you decide what to do next.
When preserving a relationship is of highest importance, obtaining payment without a letter of demand is likely the best move.
Conclusion
It is not strictly necessary to have a lawyer write a letter of demand on your behalf.
However, there are definitely upsides to doing so. Debt recovery lawyers, civil litigation lawyers and civil dispute lawyers know how to write a letter of demand that is clear, concise, and able to convey the severity of the situation. Their professional insight will also be invaluable in the case you decide to pursue legal action.
Practically, the recipient receiving a letter with a lawyer’s letterhead on it may encourage them to consider resolving the matter more than a letter from an individual or a business because it makes it clear that further legal action is possible and may be imminent if the situation is not resolved.
Andrew Byrnes Law Group are experienced civil lawyers serving Canberra and the surrounding areas, including Queanbeyan, Goulburn, and Wollongong. We’re ready to help you with your debt recovery and dispute resolution efforts by providing high quality, tailored legal advice and representation, should you need it.
If time is of the essence and you are cost conscious, we are pleased to offer an online letter of demand service through our Online Legal Services page. We will send you a tailored letter of demand finessed by our lawyers within 48 hours of completing an online interview. Once you approve it, it will be sent on your behalf to the other party.
All this for just $330.00 incl GST.
If you’re looking for a lawyer to help you draft a letter of demand, get in touch today or click here to find out more about our online letter of demand service.
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