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Q: What is a Letter of Demand?

A letter of demand is a letter stating a legal claim which makes a demand for a remedy, such as restitution or performance of some obligation, resulting from a legal wrong.

It is usually sent as the last step taken before commencing legal proceedings when a person is owed money and has tried unsuccessfully to get payment.

A letter of demand can also be used when a party has done work inadequately and further work (or some other remedy) is required to rectify the problem.

A letter of demand states what is owed, what it is owed for and when the remedy needs to be completed by. It often includes a warning that legal action will be taken if the remedy is not received by the nominated date.

Q: What are the legal requirements for a Letter of Demand?

A letter of demand may be relied upon in legal proceedings and it is therefore important to ensure it is properly drafted before sending it.

A letter of demand should:

  1. Clearly and accurately name the correct party that the claim is against.
  2. Properly set out the legal claim by summarising the relevant details of the contract or agreement between the parties, with as many specific details as possible.
  3. State the legal entitlement to the claim and the applicable law – i.e. breach of contract.
  4. Refer to and provide any relevant documentation, previous requests for payment and invoices.
  5. Clearly and unequivocally make a demand for a remedy – i.e. compensation, refund, or performance of an obligation.
  6. Include a time limit, within which the party in breach must comply, or risk going to court to settle the issue.
  7. Be posted to the correct address and email, to ensure the recipient properly receives it.

Q: Do I have to respond to a Letter of Demand?

One way or another, it is always better to respond to a letter of demand. We see many instances where people have put their head in the sand upon receiving a letter of demand and are therefore served with legal proceedings.

Court proceedings can be a costly and time-consuming process, and in most cases, it is better to try and negotiate a resolution rather than take the risk in obtaining a court judgement.

If you respond to a letter of demand, you are giving yourself a chance to avoid the court process and resolve the matter commercially.

Q: How do I respond to a Letter of Demand?

Ultimately, the decision about how to respond to the letter of demand is yours and will depend on the circumstances.

When you first receive a letter of demand, you should be careful not to send off an angry response– even if you disagree with anything stated in the demand or you have a valid reason for not making a payment.

Before responding to the letter, you should:

  1. Consider the accuracy of the claim against you, what you agree and disagree with;
  2. If necessary, seek further information from the claimant; and
  3. Obtain legal advice.

If you disagree with the claim made against you, you may respond noting your disagreement and explaining why you disagree. The explanation may be brief or detailed, but you should always remain unemotional and stick to the facts as you understand them. You should clearly state you position as to why you are not liable to meet the demand.

Depending on your position, you may refuse the demand entirely, or you may consider making an offer of settlement to resolve the dispute. For example, to pay a certain amount that you agree is owing or to pay in instalments.

If you do try to negotiate, you should ensure that any correspondence is sent on a ‘without prejudice basis’, so that any statements made during your discussions cannot be used against you in court proceedings at a later date.

If you have received a Letter of Demand, or want to issue a Letter of Demand, Elvin Lawyers can assist you to ensure that all your legal bases are covered!

Contact Us for further advice