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Construction Lawyer & Building Solicitors Sydney | Contracts Specialist Law Firm
100 Harris St, Pyrmont
24/7 Customer Support
You can contact us during the above work hours.
First consultation is FREE.
A letter of demand is a formal written request from a creditor to a debtor, seeking payment or action to rectify a breached obligation. Typically used in cases where payment has been significantly delayed, this document serves as both a reminder and a warning to the debtor.
In the construction industry, a letter of demand enforces the right to payment under the Security of Payment Act, offering a cost-effective solution for debt recovery. By sending a well-crafted letter of demand, creditors can assert their rights and potentially avoid lengthy and expensive legal disputes.
The primary purpose of a letter of demand is to resolve disputes, such as unpaid invoices or breaches of contract, without resorting to court involvement. This approach offers several benefits, including potential cost and time savings for both parties.
By clearly outlining the issue and the expected resolution, a letter of demand can open a dialogue for negotiation and promote a fair outcome. Applicable across various industries, this method is particularly valuable for contractors and business owners seeking timely payments while maintaining professional relationships and avoiding lengthy legal battles.
Letters of demand are used to recover payment in different situations and not just in the construction industry. It can be used to recover unpaid wages, invoices, rents, loans, and deposits.
But in the context of contractor/business owner, the situation could be illustrated as something like the example below:
Kenny is a 40-year-old subcontractor based in Sydney. He received a call from a business owner (Owner) who urgently needs him to fix his electricals. They both discussed the problem and came up with an agreement on resolving it. Kenny told his client about the price which also includes the expenses for extra materials needed to fix the electricals. The Owner agreed as he is desperate to have his electricals fixed immediately. The parties also agreed on the due date for the Owner to pay Kenny.
Kenny did everything he could to get the electricals fixed quickly. He was able to finish the work properly and correctly. However, when the due date for the payment came, he did not receive anything from the Owner. He called up the Owner and he was promised that he would get paid the following week. Kenny agreed and waited until next week. But when the time for payment came again, Kenny did not receive anything. He phoned his client again but this time, he could no longer reach him. Kenny then decided to go to his client personally. He was told the same promise of getting paid again but it never happened.
Before writing a letter of demand, consider the following steps:
Writing the letter:
Consequences of sending a letter of demand:
Be aware that sending a letter of demand may impact your business relationship with the debtor. It could also potentially escalate the situation, leading to legal action if the issue remains unresolved.
Handling debtor responses:
TIP: When you send your letter to your debtor, make sure that you keep a proof that you have mailed your letter. This could be evidence you can use in case the situation escalates into a legal dispute.
[Address]
[It is best to send the letter by Express post to the registered business address.]
Dear Sir,
We refer to our outstanding payment claims which are overdue.
[insert details of whole outstanding invoices that have not been paid providing sufficient information on the claim. Examples: invoice number, invoice date, invoice amount]
This letter is not a progress claim pursuant to the Building and Construction Security of Payment Act 1999 (NSW).
If you fail to settle the outstanding debt [total debt inclusive of GST] within 7 days of receipt of this demand, we will commence enforcement action without further notice.
We will rely on this letter as to costs.
Regards,
[Your name]
Your client may not realise how much money they owe you. In some instances, they may have forgotten it or have a different reason for not being able to pay immediately. Thus, a letter of demand lets your client know how much they need to pay you.
For legal reasons, this could serve as solid proof that you tried recovering your money from your client. This could be an immediate resort for contractors, subcontractors, and suppliers before even deciding to take their case to the court. It is also advisable that two or three letters of demand are sent before taking legal action.
If you need assistance writing a letter of demand, consider consulting a construction lawyer with expertise in debt recovery.
John Dela Cruz, the principal lawyer at Contracts Specialist, has over 10 years of experience in construction law and can guide you through the process. Reach out to John today for professional advice and support in crafting a compelling letter of demand.
Contracts Specialist is a Sydney-based construction law firm dealing with
building disputes, debt recovery, and construction contracts day in and day out. We can assure you that you are given the quality legal service that you rightfully deserve. So get paid now and call John Dela Cruz.
First consultation is FREE.
If you’re a homeowner in New South Wales, it’s crucial to understand Construction Law to protect your investment. This ultimate guide to Construction Law is specifically designed to provide homeowners with essential insights into the legal landscape of home building in NSW.
If you’re a homeowner in New South Wales, it’s crucial to understand Construction Law to protect your investment. This ultimate guide to Construction Law is specifically designed to provide homeowners with essential insights into the legal landscape of home building in NSW.