4 Steps You Can Take When You Disagree With a Letter of Demand

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Table of Contents

• 1. Request Clarification or More Information
• 2. Respond to the Claims Made
• 3. Negotiate or Mediate
• 4. Get Legal Advice on Your Position
• Key Takeaways

A letter of demand is a formal letter a person sends demanding something (usually money) from another person. You will likely receive a letter of demand if you have failed to pay an agreed amount that is now overdue and remains unpaid. It serves as a notice that you are required to take certain steps or potentially face legal consequences if the demands are not met within a specified timeframe. It is imperative not to disregard this correspondence, especially if you disagree with the demand, as ignoring it may lead to unnecessary legal proceedings. Below, we set out four steps you should consider taking instead if you disagree with a letter of demand.

1. Request Clarification or More Information

You should ask for clarification or more information if you believe the other side has made a mistake, for instance: 

• calculating the amount you owe;
• the amount payable; or
• some other details relating to the contractual relationship between the parties.

For example, uppose you believe there is a mistake in the calculation of the outstanding amount, and you can prove in your records that the agreed upon work amounted to a different amount. It is essential you work to request clarification on the basis of the outstanding amount. If this is the case, it’s crucial to respond promptly and articulate the specific aspects of the demand that require clarification. The key here is not to delay requesting clarification or more information. 

Typically, a letter will state that the party making the demand will take further action if you do not meet the demand within a short timeframe. You do not want to risk them taking further action due to your failure to respond within the prescribed time. However, if the provided time frame is unreasonable or you need more time for legal advice, it may be possible to request an extension from the other party. The process of requesting clarification or more information can help facilitate open communication and prevent unnecessary legal actions. This can lead to a more constructive resolution process. 

2. Respond to the Claims Made

If you disagree entirely with the demand, it may be appropriate to answer the points the other side has made. It is worthwhile engaging a disputes lawyer before responding to ensure there is a legal basis for your position and to help maximise your chances of a fair and favourable resolution. Any response should clearly outline the reasons why you believe you are not responsible for paying the outstanding debt.  

Consider the following situation. You enter a contract for services, and those services have not been provided in agreement with the contract. Nevertheless, the service provider is demanding payment. Your response to the letter of demand should identify what aspects of the service you have not received. If you choose to take this approach, ensure that you thoroughly address each point the other party has raised to build a strong case for your position. By taking this approach, you can maximise your chances of a fair and favourable resolution that reflects the actual services provided. Therefore, protecting your interests.

3. Negotiate or Mediate

A letter of demand often includes a warning that failing to pay within a specified timeframe may lead to the other party to initiate legal proceedings in court. Resolving a dispute through litigation can quickly become very costly and time-consuming. If the disputed amount is relatively small, it is in both parties’ interests to resolve the matter out of court. If you disagree with a letter of demand, you should take proactive steps to negotiate or mediate the issue.

Mediation

Mediation involves the intervention of a neutral third party – the mediator – who assists the parties in resolving their dispute. Negotiation or mediation can be a cost-effective way to approach dispute resolution. You should remember that requesting a negotiation or mediation will not necessarily stop the other side from taking the matter to court. Some contracts, however, will require parties to refer the matter to mediation (or another dispute resolution process) before commencing legal proceedings in a court. Alternative dispute resolution can allow both parties to discuss their position, explore potential compromises and work towards mutually agreeable solutions. This approach encourages an opportunity for a constructive resolution, which can help maintain positive relationships and safeguard reputations. 

Negotiation

Since litigation can result in high costs for both parties, it is important to consider how best to negotiate with the other party. Effective negotiation involves both parties making concessions and finding a middle ground for agreement. You should consider whether your best option is to receive legal advice before mediation or consider having a lawyer negotiate with the other party on your behalf. 

For example,  you are a small business owner and have received a letter of demand from a web design service provider you have engaged. In this situation, if both parties are mutually agreeable, the mediator can facilitate the discussions between you and the web design service provider to explore potential compromises and solutions. Throughout this process, you can clarify misunderstandings and hopefully come to an agreement that resolves the dispute. This out-of-court process will likely save you time and costs. 

4. Get Legal Advice on Your Position

Obtaining legal advice on your position is prudent. A specialist disputes lawyer can thoroughly assess your case, offering insights and advice into your contractual claim and legal standing. This will give you a clear understanding of your options and the likely outcome of any legal action. If your reason for disagreeing with the demand is legally sound, you should explicitly communicate this to the other side. This demonstrates your commitment to a fair resolution and your readiness to defend your position. 

In addition, having a lawyer review your situation and advise on your legal position can assist in refocusing on your objectives in the matter and putting your best foot forward with any negotiation or mediation. It is often difficult for each party to continue communicating effectively, given how quickly many matters can escalate. Disputes lawyers have expertise in navigating these situations, offering valuable support and guidance throughout the process.  

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Key Takeaways

When faced with a letter of demand that you disagree with, the most important point to remember is that you are working within a short time frame. Taking prompt and appropriate action is crucial to prevent the situation from escalating into a costly dispute. It is important to receive legal advice and support to make sure you are taking the best next steps and following any required processes and procedures. 

If you need advice on what steps you should take when you disagree with a letter of demand, contact our experienced dispute resolution lawyers as part of our LegalVision membership. For a low monthly fee, you will have access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.