In Australia, you can send a letter of demand when you have tried unsuccessfully to get your invoice paid and it is time to take more serious action. Note that this is an opportunity to put your concerns in writing and offer the other party a chance to seek solution before further action is taken.
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What is a Letter of Demand?
A letter of demand more or less states how much the company owes you, what for and when they need to pay the invoice. Note that it may also include a warning that you will consider legal action if the debt is not paid by a particular date. The title ‘Letter of demand’ at the top of the page lets the hirer or buyer understand that you are serious about getting your money.
However, it is very imperative to ensure that you have already sent reminders before you send a letter of demand. These reminders are expected to contain a correct invoice and clear intentions of when you expect the invoice to be paid. It is also important to understand the consequences of sending a letter of demand. It could inflame a dispute, but may still be necessary to recover a debt.
It is very pertinent to also find out who owns the company that owes you money. Even though it may not be the person who you made the original agreement with, the ideal approach is to send your letter of demand to the person who owns the business.
Also, if you decide to prepare the letter of demand yourself, you may wish to adapt some online sample letter for your situation. A lawyer can write a letter of demand for you on the law firm’s letterhead. This can sometimes encourage the hirer to pay the debt promptly.
Meanwhile, have it in mind that most law firms charge a set fee to write a letter of demand on your behalf. Note that this can be a relatively inexpensive and effective way of recovering your debt. You will also have to make it clear to the lawyer that the letter of demand is all you are asking for.
Getting advice from a lawyer will usually cost you more. It is also advisable you send two or three letters before beginning court action and provide 7-21 business days to pay the debt, which shows the court you have tried to be reasonable. If the debt is substantially overdue, two Letters of
Demand should be sufficient notice to repay, but you may wish to consider providing a longer period of time to pay. In the event you only intend to send one letter or if it is your final Letter of Demand, you should consider providing 21 days for the debtor to pay.
But notwithstanding the number of letters you send, you should give the debtor a total of at least three weeks to pay before starting court action. In Australia, this gives the debtor a fair opportunity to respond and also gives ample time in the event they are away or are in hospital and have not received the letter.
5 Steps to Writing a Letter of Demand for Outstanding Payment to a Company
Just like it was stated above, a demand letter serves a few purposes. You write it to let a person or company know that they owe you money and that you intend to collect. Note that the best outcome of a demand letter is that once the person or company is put on notice, they will pay what’s owed to you and you never have to take it any further.
This would save you both the time, effort and money it takes to hire a lawyer and handle the case in court. Steps you will take to write a good letter of demand include:
You should never assume everyone knows the facts. Even if you think they do, take your time to write your version of the facts so that if you end up in court, you have a document that sets forth the nature of the dispute.
It should also offer enough contexts for someone unfamiliar with the situation to understand what happened. The facts should include your attempts to resolve the dispute. Refer to email, conversations, or other communications that demonstrate that legal action is the last resort.
Refer to Evidence
If there is evidence (like a contract), you don’t need to include it, but you should refer to it. For instance: “In a contract between Samuel and Martha, dated July 24, 2020, Samuel agreed to pay Martha a sum of $30 in exchange for Martha providing two hours of landscaping services.”
Note also that you need not attach the actual contract in your demand letter, save it in case you need to use it as evidence in court later on. If there is evidence in the recipient’s possession, mention it in the letter. Have it in mind it is illegal to destroy evidence, but that doesn’t mean it doesn’t happen. The clearer you are about what the evidence is, how you know the recipient has it or controls it, and why it is important, the better off you are if you need to explain it in court.
Make a Demand
You will also have to be specific as to what you want. If there are multiple claims at issue, choose a dollar amount for each item. For example, if you are seeking restitution because someone drove on your lawn and damaged your property, outline exactly what you need to cover:
- $40 for cost of new mailbox
- $130 for cost of mailbox installation
- $90 for new grass seed and soil
- $380 for cost of labour to lay and maintain seed until grass grows
Howbeit, if there is an issue of fact about whether the letter’s recipient is actually at fault for the incident, explain why you believe the recipient owes you this money.
Set a Deadline and Establish Method of Payment
Explicitly state a reasonable deadline based on the amount of money owed. If it is a huge sum of money, you might even offer the possibility of payment installments. Either way, be clear about when and how you expect to be paid.
Offer a Consequence
Typically, let the recipient understand that if your demands aren’t met, what you are planning to do (i.e., file a lawsuit). However, do not forget that Extortion Is Never A Legal Consequence. If the person does not meet your demands, the only recourse is to file a lawsuit. Always try not to threaten with the following:
- Damage or destruction to property belonging to the person or their family or business associates
- Accusing the person of a crime
- Blackmail, or exposing a secret to cause shame, disgrace, humiliation, or reputation harm to the recipient or their family
- Physical harm or death to the recipient or their family
Advising the person that you will file a lawsuit if your demands aren’t met is acceptable. Any of the other types of threats are not, and you will be in danger of prosecution if you make them.
A demand letter is only applicable for a civil lawsuit. A civil case is between a plaintiff and defendant (or multiple plaintiffs and defendants) in which one party sues another to recover monetary damages or property. It is never a tool to threaten criminal prosecution. Only the government (federal, state, or local) can charge a person with a crime.
If you are unsure about what to include in a demand letter, how to phrase it, or whether you are making an accurate and compelling argument, consider talking to an attorney. It is never ideal to go to court — it involves a lot of time and money, and there are no guarantees about the outcome.