You have received a letter of demand. It claims you owe money, alleges a breach of contract, or demands you take some action. The sender has given you a deadline — typically 7 to 14 days — to respond before they escalate to tribunal or court proceedings.
Ignoring the letter does not make it go away. Responding poorly can weaken your position. This guide explains your three options, how to decide which path to take, and what a proper response looks like in each scenario.
What a letter of demand actually is
A letter of demand is a formal written notice sent before legal proceedings. It sets out:
- The sender’s claim against you (debt, breach, damage)
- The legal basis for the claim (contract, statute, tort)
- The amount or action demanded
- A deadline for your response or payment
- A warning that court or tribunal action will follow if you do not comply
The letter itself is not a court order. You are not legally required to pay simply because someone has sent you a demand. But you should respond appropriately if you want to avoid default judgment or unnecessary legal costs.
Your three response options
When you receive a letter of demand in Australia, you have three paths:
- Pay in full — accept the claim and settle immediately
- Negotiate — acknowledge part of the claim and propose a settlement
- Dispute — reject the claim and defend your position
Choosing the right one depends on the strength of the claim, the evidence you hold, and the commercial reality of the dispute.
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Option 1: Pay in full
When to choose this option:
- The debt is legitimate and you have no defence
- The amount claimed is accurate
- You want to avoid tribunal fees, legal costs, and time spent defending
- Paying now is cheaper than fighting later
What to do:
Contact the sender in writing, confirm you will pay, and request:
- Payment method and account details
- Written confirmation that payment will settle the matter in full
- A release or discharge of the claim once paid
Do not pay without getting confirmation in writing. Once you transfer the money, you have no leverage to ensure the sender provides a proper release.
Template response:
> I refer to your letter of demand dated [date]. > > I accept the claim and will pay the amount of $[amount] in full settlement. > > Please confirm in writing that: > 1. Payment of $[amount] will discharge the debt in full > 2. No further amounts will be claimed > 3. You will provide a written release upon receipt of payment > > Please provide your payment details and I will arrange transfer within [timeframe].
Send this by email and keep a copy. Once you receive confirmation, pay promptly and request a signed deed of release or letter confirming the matter is closed.
Option 2: Negotiate a settlement
When to choose this option:
- You accept part of the claim but dispute the full amount
- You cannot afford to pay the full sum immediately
- The sender has overstated damages or included disputed charges
- A negotiated outcome is faster and cheaper than tribunal proceedings
What to do:
Respond within the deadline, acknowledge the parts of the claim you accept, and make a counter-offer. Be specific. Vague responses like “I can’t afford this” or “your amount is wrong” achieve nothing.
A strong negotiation response includes:
- What you accept and what you dispute (with reasons)
- A specific counter-offer (lump sum or payment plan)
- A proposed timeline
- A request for a deed of settlement once terms are agreed
Template response:
> I refer to your letter of demand dated [date] claiming $[amount]. > > I accept that I owe $[partial amount] for [specific item/service]. However, I dispute the remaining $[disputed amount] on the following grounds: > > [State your reasons clearly — e.g., “The invoice for $X was never agreed in writing” or “The damage you claim was pre-existing”] > > I propose the following settlement: > – Payment of $[offer amount] in full and final settlement, OR > – Payment plan: $[amount] per [week/month] over [period] > > If you accept this proposal, I request a deed of settlement confirming no further amounts will be claimed. > > Please respond by [date — give them 7 days].
Send this in writing. Do not negotiate over the phone without confirming everything in writing afterwards. If the sender accepts your offer, get a signed settlement deed before making any payment.
Option 3: Dispute the claim
When to choose this option:
- The claim is factually wrong or legally baseless
- You have evidence that disproves the allegation
- The sender has no contract, no proof of damage, or no legal standing
- The amount claimed is grossly inflated or includes items you never agreed to
What to do:
Respond within the deadline and set out your defence clearly. If you fail to respond and the sender files tribunal proceedings, you may face a default judgment.
A proper dispute response includes:
- A clear statement that you reject the claim
- The factual and legal reasons for your rejection
- Reference to any evidence you hold (contracts, emails, photos, receipts)
- A statement that you will defend any tribunal or court proceedings
Template response:
> I refer to your letter of demand dated [date]. > > I reject your claim in full for the following reasons: > > 1. [State your first defence — e.g., “No contract was ever formed between us”] > 2. [State your second defence — e.g., “The damage you claim was caused by your own actions, not mine”] > 3. [State your third defence — e.g., “The invoice you rely on was never issued or agreed”] > > I hold the following evidence in support of my position: > – [List key documents or facts] > > If you commence tribunal or court proceedings, I will defend the claim and seek an order for costs. > > I do not accept any liability and I do not authorise you to contact me further unless through formal legal proceedings.
Send this by email and keep a copy. If the sender does file tribunal proceedings, you will need to lodge a formal defence and attend the hearing. Your response letter is not a substitute for the tribunal defence form — you must file that separately by the deadline stated in the application.
Common mistakes to avoid
Ignoring the letter
If you do not respond and the sender files a tribunal application, you may not receive proper notice. The tribunal can make orders in your absence.
Admitting liability when you have a defence
Do not say “I know I owe this but I can’t pay right now” if you genuinely dispute the claim. Any admission can be used against you in tribunal proceedings.
Negotiating without getting it in writing
Phone calls and verbal agreements mean nothing. Every offer, counter-offer, and settlement must be confirmed in writing. If you agree to a payment plan over the phone, the sender can still sue you for the full amount unless you have a signed deed.
Paying without a release
Do not transfer money without written confirmation that payment will settle the matter in full. Once the money is gone, you have no leverage to demand a release or prevent further claims.
Missing the deadline
The sender sets a deadline for a reason. If you miss it, they may file tribunal proceedings immediately. Respond within the timeframe stated, even if your response is “I need more time to obtain advice.”
What happens after you respond
If you pay in full:
The sender should provide a written release confirming the matter is closed. If they do not, chase them for it. Keep the release on file in case they attempt to claim again later.
If you negotiate:
The sender may accept your offer, reject it, or make a counter-offer. If you reach agreement, insist on a signed deed of settlement before making any payment.
If you dispute:
The sender may drop the claim, or they may file tribunal proceedings. If they file, you will receive a notice of hearing. You must lodge a defence and attend the hearing.
How Claim Done helps with legal responses
If you have received a letter of demand and need to respond, Claim Done prepares a formal legal response for $49. You upload the demand letter and your evidence, and our Programmatic Algorithms draft a response citing the applicable Australian law.
The response is tailored to your situation — whether you are paying, negotiating, or disputing. It is formatted for immediate use and delivered in about 5 minutes.
Claim Done does not provide legal advice.
Final checklist before you respond
Before you send any response to a letter of demand:
- Have you identified which option applies to your situation?
- Have you gathered all relevant evidence (contracts, emails, invoices, photos)?
- Have you stated your position clearly and without unnecessary emotion?
- Have you kept a copy of everything you send?
- Have you sent your response by email with a read receipt or tracking?
- If negotiating, have you requested a deed of settlement?
- If disputing, have you confirmed you will defend any tribunal proceedings?
Respond within the deadline. State your position clearly. Get everything in writing. If you need help preparing a formal response, Claim Done can draft one for you in about five minutes.
Frequently Asked Questions
Do I have to respond to a letter of demand?
You are not legally required to respond to a letter of demand, but ignoring it is a mistake. If the sender files tribunal proceedings and you do not respond, the tribunal can make orders against you in your absence. Always respond within the deadline, even if your response is to dispute the claim or request more time.
Can I negotiate a payment plan instead of paying in full?
Yes. If you accept the debt but cannot pay immediately, propose a payment plan in writing. State the amount you will pay per week or month and the total period. The sender may accept, reject, or counter-offer. If you reach agreement, insist on a signed deed of settlement before making the first payment.
What if I dispute part of the claim but accept the rest?
Respond in writing, clearly stating which parts you accept and which you dispute. Make a counter-offer for the amount you believe is owed. If the sender accepts, get a deed of settlement. If they reject your offer and file tribunal proceedings, you will need to defend the disputed portion at the hearing.
What happens if I miss the deadline to respond?
The sender may file tribunal or court proceedings immediately. If you do not receive proper notice of the hearing, the tribunal can make orders in your absence. If you miss the deadline, respond as soon as possible and explain the delay. Do not assume the matter has gone away simply because the deadline has passed.
What changes when your answer is in writing
Same problem. What a prepared case looks like.