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If you have entered into a contract and lost money because of the other party’s breach, then you may want to begin the debt recovery process. The debt recovery process is how you can recover money from the party who is at fault. It usually happens after a failed negotiation process. A ‘letter before action‘ is a letter that warns the party at fault of your intention to bring court proceedings if you do not reach an agreement. This article will explain how a letter before action works, how to use one against another party and what to do if one has been sent to you.
What is a Letter Before Action?
A letter before action (sometimes called a ‘letter before claim’) is the first step in the debt recovery process. If you want to begin a debt claim, you must send a letter before action. The letter before action is used in all civil disputes, such as where:
- the other person is in breach of contract;
- the other person has defamed you; or
- you request documentation or data.
If you fail to provide a letter before action, it will invalidate a court action. Further, if you are sending a letter before action, it is important to comply with ‘pre-action protocols’. Pre-action protocols are the rules which state what you should do before bringing a court action, and they also govern the conduct of the parties.
Before bringing a letter before action, you will also be encouraged to try to settle your dispute. It is advised that you seek professional legal advice from debt recovery solicitors to ensure that you have complied with all pre-action protocols.
What Will a Letter Before Action Include?
Generally, if you are sending a letter before action, you will need to include:
- a summary of the facts of your claim;
- a statement of your demands from the defendant;
- a time limit for the defendant to respond (for example, seven days); and
- relevant documents.
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What Do I Need to Know if I Am Sending a Letter Before Action?
If you are sending a letter before action, you will first want to ensure that you are complying with all relevant pre-action protocols. Failure to comply with pre-action protocols can result in sanctions by the court, such as:
- a fine; or
- an order to pay legal costs.
A letter before action does not have to mean that you want to take the party to court. Instead, you can use a letter before action as part of a wider alternative dispute resolution process. For example, you may use it as a negotiation tool to put pressure on the other party to settle the claim.
Finally, you want to make sure that you are familiar with local law practices if you are sending a letter of action in a cross-border dispute. There may be specific requirements in different jurisdictions. For example, a letter before action is rarely sent before court proceedings in Germany.
What Do I Need to Know if I Am Receiving a Letter Before Action?
If you receive a letter before action, you will want to send a reply within the stated time limit. At this stage, your pre-action conduct is important. Your reply should state whether you:
- admit to the claim;
- dispute the claim; and
- wish to make a counterclaim.
In considering your position, you should seek professional legal advice. If you are disputing the claim, you must provide all relevant documents which support your position, alongside any additional information which can support your claim.
If you fail to respond to the letter before action, this will lead to the next step of the debt recovery process (which is usually court proceedings). Additionally, you may receive a ‘winding up petition’ as part of this process, which can seriously jeopardise your business activity.
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Key Takeaways
A letter before action is the first step in the debt recovery process, and it will usually set out a party’s intention to take the case to court. However, it can also be used as a negotiation tool to force a party into a settlement.
If you are sending one, you will want to make sure that you comply with all relevant pre-action protocols. If you receive a letter before action, you will want to assess your position and decide whether to dispute the claim or counterclaim. Therefore, it is recommended that you seek professional legal advice from debt recovery solicitors.
For assistance dealing with a letter before action, LegalVision’s disputes lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A letter before action can be used for any civil (non-criminal) dispute. However, if you are sending it to a party in a different country, you should be aware of what the rules in that country are. This ensures that a letter before action is an appropriate action to take.
Since a letter before action is a precursor to filing a legal claim, it should clearly outline the basis for your claim. This includes the relevant facts, the demands you are making, a timeframe for the other party to respond and any supporting documents.
If you are on the receiving end of a letter before action, you should first seek legal advice about which direction you should take. Then, it is essential that you respond within the given timeframe with your position, whether that be to admit to or dispute the claim. Failure to do so will usually result in legal proceedings.
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