A Letter of Demand comes to play where an agreement has been entered into and a breach of the agreement has occurred. When all negotiations to settle the breach have failed to have any effect, a Letter of Demand – sent to the defaulting party – is often considered to be a final reminder before any legal action is taken.
What should be included in a Letter of Demand?
A Letter of Demand provides the amount due and the requirement for performance of certain obligations including refund and other rights. The Letter might also ask the other party to refrain from doing something (injunction) or to carry out the obligations of a contract that they had agreed to. It is considered to be a warning that legal action may be considered if the debt is not paid within a particular date.
It must state:
- the actual amount due;
- a description of the service or goods that were provided;
- the due date of payment for the goods/services provided; and
- a warning that if the invoice is not paid, recourse to legal proceedings shall be initiated
What are the benefits of sending a Letter of Demand?
- It is a form of notification to the other party of the intention to initiate court proceedings if the debts are not paid off;
- The recipient gets a final opportunity to pay off the debt;
- The recipient’s reputation is not harmed;
- The Court is aware that a reasonable opportunity was provided to the other side and it also acts as evidence showing that attempts were made to resolve the dispute.
Is it important to respond to a Letter of Demand?
It is always advisable to respond, as it provides a chance to avoid further complications by resolving the matter out of court. Ignoring a Letter can lead to court proceedings which can be both costly and time-consuming. If the Letter of Demand is ignored, a Statutory Demand can be sent which requires payment of the debt within 21 days. Ignoring a Statutory Demand will lead to court proceedings and the company will be deemed insolvent and can be wound up by a court order.
What can be done if you disagree with the Letter of Demand?
- You can ask for specific clarifications pertaining to certain issues raised in the Letter;
- You can try to negotiate or mediate the matter out of court; and
- You can obtain legal advice from a specialist lawyer and communicate your views to the other side.
More info – provided by Business Australia HERE.