I Received a Letter of Demand. What Now?

Receiving a letter of demand can be stressful, but it does not necessarily mean court proceedings have commenced.

A letter of demand is a formal request for payment or action before further legal steps are considered. It may also provide an opportunity to resolve the dispute without going to court.

1. Do not ignore it

Ignoring a letter of demand will not make the issue disappear. The sender may commence court proceedings, and you could lose the opportunity to resolve the dispute early.

Check the response deadline and act promptly.

2. Identify who sent it

Confirm who is making the claim and whether the letter was sent by:

• an individual or business;
• a debt collector;
• an insurer; or
• a solicitor acting for another party.

A solicitor’s letter does not mean the claim is correct, but it should be taken seriously.

3. Understand the claim

Read the letter carefully and determine:

• what you are alleged to have done;
• why the sender says you owe money;
• how the amount was calculated;
• what action they require; and
• when you must respond.

Do not focus only on the amount claimed.

4. Gather your evidence

Collect all relevant documents, including:

• contracts and agreements;
• invoices and receipts;
• bank and payment records;
• emails and text messages;
• photographs; and
• previous correspondence.

Keep the original documents and do not delete anything relating to the dispute.

5. Avoid making admissions

Do not immediately admit liability or send an emotional response.

You may dispute the entire claim, agree that only part of the amount is owed, or require further information before responding.

If you are unsure, obtain legal advice before replying.

6. If you dispute the claim

You are not required to accept a claim simply because it appears in a formal letter.

You may dispute it because:

• the amount is incorrect or has already been paid;
• the contract provides otherwise;
• the goods or services were not supplied;
• the work was defective;
• the agreement was cancelled; or
• you were not responsible for the alleged loss.

Your response should be calm, clear and supported by evidence.

7. If you need more information

If the letter does not adequately explain the claim, request supporting documents such as contracts, invoices, calculations, receipts or correspondence.

Do not guess how the amount was calculated.

8. If you owe the money

If the claim is valid but you cannot pay immediately, you may be able to negotiate:

• full payment;
• instalments;
• a reduced settlement; or
• another payment arrangement.

Any agreement should be properly recorded in writing.

Letter of demand or court documents?

A letter of demand is generally sent before court proceedings commence. It is different from a Statement of Claim or other court document.

If you receive court documents, obtain advice immediately and carefully note the deadline. Failing to respond may result in default judgment being entered against you.

Keep detailed records

Maintain a file containing the letter, attachments, evidence, responses and notes of any conversations. Record all important dates and deadlines.

These records may become important if the dispute proceeds to court.

When should you seek legal advice?

Consider speaking with a solicitor if:

• the amount is significant;
• you strongly dispute the claim;
• the issues are complex;
• your business or property is involved;
• a solicitor sent the letter;
• court proceedings have been threatened; or
• you do not understand the claim.

Early legal advice may save time, money and stress.

What should you do now?

• Read the letter carefully.
• Identify who is making the claim.
• Understand what is being claimed and why.
• Check the deadline.
• Gather your evidence.
• Avoid unnecessary admissions.
• Decide whether you agree, dispute the claim or need more information.
• Obtain legal advice if required.

The bottom line

Do not panic, ignore the letter or immediately admit liability.

Take time to understand the claim, gather your evidence and contact Lawgix to discuss your options. Early advice may help resolve the dispute without court proceedings.