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3 Things You Should Know About Letters of Demand

Posted by Anthony Dare | Feb 09, 2021 | 0 Comments

Sadly, for most business owners, unpaid invoices are an all too common occurrence. Fortunately, there are some simple steps you can take to give yourself the best chance of recovering the amount owed.

One of these simple steps is to send a letter of demand.

What is a letter of demand?

A letter of demand is a letter to the other party formally requesting action - typically money to be paid (for example, demanding payment of an overdue invoice). In most cases, it warns the other party (the debtor) that if the debt is not paid you will commence formal legal proceedings to recover the amount owed.

Are there steps I should take before sending a letter of demand?

Yes.

Before you send a letter of demand, you should have already sent reminders and tried to speak with the appropriate person responsible for payment of the outstanding amount. These attempts should re-attach the invoice, set clear expectations around payment and also try and resolve any disputes that may exist.

It might also be worth considering the importance of the relationship you or your business have with the debtor. A formal letter of demand may cause offence and strain a relationship, so it's worth taking this into account before you proceed.

If you have tried the above but have still not received payment, then a letter of demand is typically the next step you should take.

What does a good letter of demand include?

A well drafted letter of demand can often see a debt paid quickly, or at least be the catalyst for a response and negotiation from the debtor. Even debtors that may have had little intention of paying the debt will often seek to negotiate if they receive a letter from a lawyer outlining a genuine claim and foreshadowing legal action.

A good letter of demand should:

  1. be addressed to the correct person (in the case of a business you may need to conduct a company search to ascertain who actually owns the business);

  2. outline the basis of the demand - a chronology as to how and why the debt arose helps to clearly communicate your position;

  3. state the amount owed and required method of payment (attaching the unpaid invoice for example is helpful);

  4. refer to the terms of business or agreement the debt relates to;

  5. claim interest on the debt if permitted by the terms of business or agreement (you should refer to the agreement's interest clause in your letter);

  6. give the debtor a reasonable amount of time to pay the debt (for example,14 days from the date of the letter);

  7. if you intend to take legal action if the debtor still does not pay, inform the debtor you will commence proceedings to recover the debt plus interest and legal costs without further notice to them;

  8. be professional and free from emotive language; 

  9. be signed and dated; and

  10. sent by post in addition to email to best ensure that it is received.

While you can of course send a letter of demand on your own letterhead without engaging a lawyer, in our experience it is best to speak with a lawyer. Among other things, time limits apply in relation to recovering debts and there are a number of other important considerations your lawyer will assist you with.

A letter of demand sent from a lawyer is also typically taken more seriously by the debtor and therefore more likely to achieve the desired result. It is far less likely to be ignored than a letter sent directly by an individual or the business owed the debt in our experience. 

If you need help recovering a debt or responding to a letter of demand, please contact Anthony Dare (Legal Practitioner Director) on 07 3158 2693 or email him at [email protected] We offer free initial consultations and fixed fee pricing on all debt recovery matters and would be glad to assist.

Disclaimer

This article is intended to provide commentary and general information only. It should not be relied upon as legal advice. It is always best to speak with a lawyer and formal legal advice should be sought if you have a particular matter of interest arising from this article.   

About the Author

Anthony Dare

Anthony holds Bachelor of Laws / Bachelor of Business Management (University of Queensland) and a Graduate Diploma in Legal Practice (Queensland University of Technology). He has also completed the Queensland Law Society Practice Management Course. Admitted as a legal practitioner to the Supreme ...

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