Have you have entered into a contract and lost money as a result of the other party’s breach? Here, it can be really difficult to undertake the debt collection process. If you are still unable to negotiate successfully with the party in breach, a letter of demand may help you. This article will explain what a letter of demand is, what you should include and how to structure your letter of demand.

What is a Letter of Demand?

A letter of demand is usually sent as a final reminder before taking legal action. It sets out your legal claim against the other side. It also states your legal rights and a demand for compensation, refund or performance of an obligation. You can also include a time limit, within which the party in breach must comply with your request, or risk going to court to settle the issue.

While a letter of demand can be an informal document, it should have:

  • a clear structure;
  • all relevant details; and
  • a concise legal argument.

Address the Relevant Person and Introduce the Matter

Like any letter, you should first address the relevant person (i.e. the party in breach). You should also immediately state what the letter concerns.

For example, “This letter refers to the installation of the washing machine on [date]”.

The Contract

Following the introduction of the letter, you should summarise the relevant details of your contract. It is best to include as many specific details as possible such as

  • dates;
  • times;
  • names of the individuals involved; and
  • any relevant receipts or invoices (especially if you are seeking a refund or compensation for money).

To ensure the information is easy to understand, you may wish to present this information in a table.

You should also list all of the terms of the contract you complied with and any obligations you performed. You should make it clear that you upheld your end of the contract and relied on the other organisation or person to do the same.

Breach of Contract

Before detailing how the other party is in breach of the contract, you should outline any applicable law. You may rely upon general contract law, the Australian Consumer Law (ACL) or other specific legislation depending on your matter. You may need to obtain legal advice to assist with this step. After outlining the relevant law, you can list how the other side is in breach of their obligations according to the law and the contract. Being specific is important, so you should include as many relevant details as possible.

For example, you may have hired a plumber to install a washing machine in your new house. The plumber did the job and took their payment. However, after a few days, the washing machine begins to leak. After calling the plumber to fix the problem, they refused. You can send them a letter of demand and refer to the plumber’s obligations under the ACL. A service provider under the ACL must provide a service with adequate care and skill or technical knowledge. The service must also be fit for its purpose. You should state in your letter that the leaking washing machine is a breach of the plumber’s obligations under the ACL.

If you attempted to negotiate rectifying the breach with the other entity, you should include that in this section. It is important for the other party and the court (if matters escalate) to recognise that you have taken reasonable steps to resolve the breach.

Effect of the Breach

Your letter of demand should include all of the ways the breach of contract has affected you. You may have lost:

  • money in paying for services that were not adequately provided to you;
  • income in being unable to work because of this breach; or

For example, a mechanic damaged your car engine making you unable to use your car for professional delivery services.

  • money in hiring someone else to fix the breach of the other party.

Ultimately, how the breach affects you depends on your specific circumstances.

Demand for Remedies: Compensation, Refund or Performance of Obligation

You should clearly list how exactly you want the other party to rectify their breach and make up for the damage you suffered. You should check the relevant law because it will typically state the remedies available to you.

If you are seeking a refund or monetary compensation, you must provide evidence of any payments of money or money owed.

For example, if you are seeking a refund of the money you paid to the plumber, you must be able to provide a receipt as evidence.

On the other hand, if you are seeking compensation for services, you should provide an invoice as evidence that another party owes you money.

Sending the Letter of Demand

It is best to send the letter via email and post to ensure the party in breach receives your letter of demand. Sometimes people do not check their emails or do not receive mail, so it is a good idea to cover all of your options.

However, whether the other side reads your letter and takes it seriously is out of your control. It is, therefore, useful to include your intention of taking the matter to court if they fail to comply with your demands within a time frame. Doing so means you do not have to wait for a response from the other party to take further action.

Key Takeaways

If you have entered into a contract and suffered loss because of the other side’s breach, you may want to consider sending a letter of demand. A letter of demand is usually the final reminder before you take legal action. However, before sending a letter of demand, it is important to attempt to negotiate with the party in breach. It is important that the structure of your letter is effective and clearly includes:

  • a summary of your contract;
  • details of the breach of contract;
  • damages you suffered;
  • a demand for remedies; and
  • your intention to take the matter to court if the other party does not comply.

If you have questions about a letter of demand or need legal advice drafting and sending a letter of demand, get in touch with LegalVision’s debt recovery lawyers on 1300 544 755 or fill out the form on this page.

When should I send a letter of demand?

You should send a letter of demand if an individual or organisation has breached their contractual obligations with you, but have so far been unsuccessful in having them resolve the issue.

What is the purpose of sending a letter of demand?

A letter of demand will set out your legal claim to the other side, and is the last step before commencing taking legal action. It will bring the contractual breach into the mind of the other party and force them to take it seriously.

What should I include in my letter of demand?

Your letter of demand should include details of the contract that the other party has breached, how they must fix this breach, and that you will take the matter to court if they do not fix this breach within a specified period of time.

How should I send my letter of demand?

It is best to send the letter both via email and post to ensure the other side receives your letter of demand.

How can I use a letter of demand to recover my debt?

Yes you can – a letter of demand is a great way to let the other side know you are serious about needing them to pay their debts.

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Lachlan McKnight
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