A letter of demand is not itself a court order, but ignoring it can remove an opportunity to clarify the dispute, preserve a commercial relationship or resolve the matter before proceedings. Read the demand carefully, verify the stated deadline and obtain advice before admitting liability or making a payment proposal you cannot honour.
01
Is the stated deadline legally binding?
The deadline deserves attention, but its legal effect depends on the source of the obligation. A contract, statute, court rule or earlier notice may impose a real time limit. A date chosen by the sender may instead be a proposed response window. Either way, silence may lead the sender to commence proceedings.
Do not wait until the last day to investigate. If a considered response cannot be prepared in time, it may be appropriate to request a short extension without admitting liability. The request should not assume the extension has been granted.
What a letter of demand is trying to do
A demand usually states the sender's version of the facts, the amount or action sought, a deadline and the consequence threatened if the demand is not met. It may be used to seek payment, stop alleged conduct, enforce a contract or create a record before litigation.
The letter is advocacy, not a judgment. Its allegations still need to be tested against the contract, communications, performance record and applicable law.
03
What should you check before replying?
Compare the letter with the underlying documents:
- Is the correct person or company named?
- Does the amount reconcile with invoices, payments and credits?
- Has the sender quoted the contract accurately?
- Were notices served in the required way?
- Is any part of the claim outside your knowledge?
- Do you have a counterclaim, set-off or separate complaint?
- Is confidentiality, privilege or reputation at risk?
For a company, confirm who is authorised to speak. An uncoordinated reply from a director, employee or accounts team can complicate the formal position.
04
What can a useful response contain?
A response may admit, deny or seek clarification on specific points. It can identify missing documents, correct the chronology, reserve rights and propose a practical route such as a meeting, mediation or payment arrangement.
Avoid broad phrases that could be read as admitting the whole claim. If only part is undisputed, distinguish it from the disputed balance. If negotiations are intended to be without prejudice, obtain advice on the correct use and limits of that label; writing the words on a document does not automatically make every communication privileged.
05
When might payment or settlement be sensible?
Commercial settlement is a risk decision, not a confession. Relevant considerations include the evidence, legal costs, interest, management time, collectability, business relationships and the value of finality.
Any settlement should define the amount, timing, release, confidentiality, costs, default consequences and whether existing proceedings or security will be withdrawn. An informal transfer without agreed terms may leave part of the dispute alive.
06
What evidence should be secured?
Preserve the letter and delivery record, agreement, variations, invoices, payment history, correspondence, work product and a chronology. For an oral arrangement, identify the people involved and contemporaneous documents that show what was agreed.
If the dispute concerns ongoing work or perishable evidence, record the current condition before it changes. Do not create a retrospective document and present it as contemporaneous.
07
What happens if you ignore the demand?
The sender may do nothing, continue negotiations or commence proceedings. If a claim is filed and you do not respond to the court documents, default consequences may follow. Interest and costs may also become issues.
The better question is therefore not whether every demand deserves a long lawyer's letter. It is what response protects your position proportionately.
Frequently asked questions
Does a letter of demand appear on a public court record?
Ordinarily, the letter itself is private correspondence unless it later becomes evidence or is otherwise disclosed. Court proceedings are a separate step.
Must I use a lawyer to reply?
No general rule requires every reply to come from a lawyer. Legal input is valuable where the amount, allegations, urgency or wider consequences are significant.
Can I ask for documents before answering?
Yes, where documents are needed to understand the claim. A focused request is more useful than a generic demand for “all evidence”.
Can the sender sue before the deadline expires?
That depends on the contract, cause of action and any applicable pre-action requirement. Do not assume the stated date guarantees that no step will be taken earlier.
Should I mark my response “without prejudice”?
Only if the communication is genuinely part of a settlement negotiation and the label is appropriate. Obtain advice where privilege matters.