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. It’s critical that you don’t ignore the letter if you disagree with the demand – this could lead to further (avoidable) legal action. Below, we set out four steps you should consider taking instead.
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 detail relating to the contractual relationship between the parties.
If this is the case, you should respond and clearly explain to the other side what aspect of the demand you need them to clarify. The key here is not to delay. Typically, a letter states that the party will take further action if you don’t meet the demand within a short timeframe.
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’s worthwhile to speak with a disputes lawyer before responding to ensure there is a legal basis for your claims. Any response should provide a clear reason why you are not responsible for paying the outstanding debt.
Consider the following situation. You have entered into a contract for services, and those services have not been provided in agreement with the contract, however, the service provider is demanding payment. Your response to the demand should identify what aspects of the service have not been provided. If you’re taking this approach, it will be important to ensure you address each point the other party raised.
3. Negotiate or Mediate
A letter of demand often states that if you don’t pay within a specified timeframe, the other side may commence legal proceedings in a court. Resolving a dispute through litigation can quickly become very costly. If the disputed amount is relatively small, it is in both parties interests to try 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 is where a third party – the mediator – assists the parties to resolve their dispute. Negotiation or mediation is a cost-effective way to approach dispute resolution. You should remember that requesting a negotiation or mediation won’t 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.
4. Get Legal Advice on Your Position
Obtaining legal advice on your position is prudent. A specialist disputes lawyer can review your situation and provide advice on your claims regarding the contract between the parties. 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.
If you disagree with a letter of demand you have received, the most important point to remember is that you are working within a short time frame. You must take appropriate steps quickly to avoid being dragged into a costly dispute. If you have any questions about your options or need assistance responding to a demand on your behalf, get in touch with LegalVision’s dispute resolution lawyers on 1300 544 755 or fill out the form on this page.
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