Legal Advisory
What is the Reasonable Person Test?
The reasonable person test is a benchmark of behaviour for determining whether something is reasonable or not. The idea of a reasonable person is a made-up concept used to help
A Letter of Demand is a formal notice demanding that the person to whom the letter is addressed perform an alleged legal obligation. This could include paying an unpaid debt, rectifying some identified problem, or delivering an item of property. It serves as a reminder of the obligations one party has towards another.
A Letter of Demand is often used in dispute resolution processes before legal proceedings are initiated. It serves as a final call to another party to fulfil a legal obligation, such as paying a debt, rectifying a breach of contract, or ceasing an infringing activity.
Farrah Motley wrote this article. Farrah is a contract lawyer with Prosper Law. She was admitted to Court in 2014 and has over ten years of experience as a legal professional.
The letter must also include proof or evidence about the existence of the debt. This may take the form of an invoice or an agreement.
The debtor must be able to comply with a letter of demand. The other party should not need to ask anything further in order to comply with the demand. For example, if no means of making payment have been provided.
The letter should be factual and professional and must be signed and dated. A record of the letter being sent must be kept for your record in case you proceed with legal action.
The letter must also mention the date by which the debt owed should be repaid, the mode of payment and the necessary action to be taken in case the party fails to pay the debt.
If the debtor has a genuine dispute, they can raise this formally by responding to your letter.
You should also ensure that you send the demand by a traceable method. This is so that you can be certain the other party has received it. For instance, if you send it via email, request a read receipt or send it by registered post.
Set out below are the steps to writing a great letter of demand. You can also find letters of demand on the internet. We also have a demand template available to purchase (including a 30 minute fee consultation with one of our lawyers).
And, if you want a legal document on our law firm’s letterhead, reach out for a fixed fee quote from one of our experienced lawyers. Our legal costs are fixed and we can advise you on your legal rights.
Start by clearly stating your name or your company’s name, the recipient’s name, and both parties’ contact information. Ensure you address the letter to the correct person or business.
These parties should be consistent with any contract that may have been agreed with the other party.
Clearly outline the issue at hand. This could be:
Be specific and include all relevant details such as dates, amounts, and any previous attempts to resolve the issue.
Clearly state what you want the recipient to do to resolve the issue. This could be paying an outstanding amount, delivering a service, or rectifying a problem.
You must include a particular date for the action to be taken and clearly state the exact amount owed. You may also wish to include interest if you have the right to do so.
Explain what will happen if the recipient fails to meet your demand. This could include legal action or reporting the issue to a relevant authority.
Attach any relevant documents that help to prove the total amount owed or the problem that needs to be addressed.
End the letter with your signature, name, and title if applicable. payment of money owed.
And remember, a letter of demand does not need to be a formal letter but can also be written in an email.
Our lawyers recommend sending a letter of demand by email or by registered post. The creditor can then ensure that the letter of demand is delivered to the recipient.
A letter of demand warns the debtor of the creditor’s intention to take further action. That is unless the debt is paid and gives them a final opportunity to pay the debt that is owing.
They can also be used as evidence that the creditor has taken steps to try to resolve the matter. This attempt to recover the money owed before commencing legal proceedings is important.
What happens if you are owed money and the debtor has not responded to you? If the debtor has not responded or has refused to pay, your next step is to send a letter of demand.
A letter of demand is generated when a person fails to pay money that is due to you or take some other action. However, in this kind of situation, two to three reminder letters should be sent before sending a letter of demand. A letter of demand, while not a last resort, should be issued at the right time.
This reminder letter gives the debtor the benefit of the doubt. This is because non-payment may be due to a mistake. Alternatively, if the debtor is experiencing financial issues, you can discuss a payment plan with them.
Sending a letter of demand is likely to have a serious and adverse impact on the commercial relationship. It is important to ensure that every avenue to recover funds has been explored for this reason. And this should be done before sending a letter of demand.
The failure to correct poor workmanship or replace faulty goods is also a common reason to issue a letter of demand.
Provided that certain other legal requirements have been met when one party delivers faulty or inadequate goods or services and to rectify that fault, additional work and/or expenditure is required, the creditor can issue a letter of demand. In these kinds of situations, it is recommended to outline the applicable law and how the other party breached its legal obligations.
In the letter, you must state how you want the other party to rectify their fault or breach. It may include completing a particular job or requesting reimbursement.
While you have the right to claim or demand what is due to you, a letter of demand must not mislead, intimidate or threaten.
To ensure that you avoid this mistake, here are some tips that you can use to make sure that your letter of demand is free of content that can be classified as misleading, intimidating, or threatening based on the Australian Solicitors Conduct Rules of 2015:
In ACCC v Sampson [2011] FCA 1165, a lawyer’s debt collection notices were found to be misleading and deceptive. This was because they included statements such as the recovery of the solicitor’s cost in addition to the claimed debt despite the creditor having no entitlement to recover such cost.
Formal demands can be an effective way to encourage debtors to pay outstanding money. This is due to the uncertainty, stress and cost associated with being taken to court for outstanding debts.
Before starting legal proceedings, consider whether you have given the debtor sufficient time to make the payment or respond.
Seven to 21 days is considered to be the ideal time for responding to a letter of demand. Or, alternatively or making a payment (even if it is just part payment of money owed).
The second thing you should consider is the relationship between you and your debtor. If that relationship is worth preserving and the demand hasn’t already damaged the relationship, then consider other options.
Sometimes it can be better to use your personal connections and relationships to get paid. And you should explore these avenues before you send a letter of demand.
Can you resolve the dispute with the debtor in an amicable way? If you can’t, good legal advice from an expert contract lawyer is essential.
Check out our latest blog posts:
The Best Legal Guide to Statutory Demands in Australia
The Best ‘How To’ Guide for Debt Recovery
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The reasonable person test is a benchmark of behaviour for determining whether something is reasonable or not. The idea of a reasonable person is a made-up concept used to help
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