If a party has suffered from another’s breach of contract, the first step to consider is sending a letter of demand. you may consider sending a letter of demand. Please note that a letter of demand is very different from a statutory letter of demand, which I will cover in another article.
What is a Letter of Demand?
While a letter of demand can be used to require payment of a debt or other outstanding monies, a letter of demand can also be used to require that a contractual obligation be performed.
Is a Letter of Demand Important
In the context of litigation, a letter of demand is often a requirement. In Galea v Camilleri [2019] NSWSC 167, Robb J at [60] found:
“It is a fundamentally important practical aspect of litigation that parties and their lawyers not lose sight of the need to send letters of demand before suit in appropriate cases.”
The First Step – The Letter of Demand
The first thing is to ascertain whether the breach is capable of being rectified. For example, a breach of a warranty or an intermediate-term can often be fixed. If the breach of the contract is a material breach or a breach that is incapable of being rectified, for example, if a party refuses to pay (or deliver a deliverable), then it is best to talk to your lawyer as soon as possible because a delay can, in some circumstances constitute, an election to vary the contract.
What Should I Include In a Letter of Demand?
The letter of demand must set out exactly how the other side breached the contract and what you expect them to do by a certain date. The letter of demand must also inform the offending party of what will happen if they don’t rectify the breach. For example, failure to respond or comply with the letter of demand will result in your company commencing legal action and seeking a costs order.
It is important that you speak to litigation lawyers about preparing and sending the letter to ensure that it is thorough and leaves no room for the defendants (if you commence proceedings) to contend that the letter, or the requirements within the letter, were unclear or inaccurate in some respect. For example, it is not uncommon for letters of demand to have the incorrect entity, inaccurate clause references, and unreasonable demands.
What Happens if the Other Side Doesn’t Respond to My Letter of Demand?
If the other party does not respond, it is a good idea to follow up with another letter or email which references your initial letter.
If you receive no response again, or you otherwise receive a response that is not favourable, then you may need to consider instructing a lawyer to commence litigation by filing a claim and statement of claim and serving it on the other side.
A letter of demand is an important first step in dispute resolution.
