If you've been let down by a breached contract, where the other party has failed to deliver agreed-upon goods or services or has provided defective products, it's time to take the next step.
After attempting to resolve the issue through informal means such as emails and phone calls, sending a Letter Before Action (also known as a Letter Before Claim) can be an effective way to settle the dispute.
This article will outline the purpose of a Letter Before Action, the impact it can have in resolving contractual disagreements and what should be contained within one.
What is a Letter Before Action?
A Letter Before Action is the last step in your attempts to resolve a contractual dispute informally and the first step towards formal dispute resolution.
It sets out your claim and provides the party in breach with a firm timeframe to respond and remedy the situation. A Letter Before Action will also make clear that if the party in breach fails to respond, you will take court action.
What should be included in a Letter Before Action?
You should not assume that the person who receives the Letter Before Claim is aware of the business relationship between you and their organisation.
Therefore, you should begin your letter with a background to the contract and details of the agreement. The contract should also be attached as an addendum to the letter. Other things to include in a Letter Before Action are:
Details of the breach of contract
Provide details of the breach and set out how the breach of contract that you have outlined has led to you suffering loss and damage.
What the party in breach of contract need to do
Set out how you want the breach remedied. For example, if you have received faulty goods, state that these must be replaced. If the breach of contract involves non-payment of invoices, you can state that the full amount must be paid within the timeframe given. You need to give the receiver of the letter enough time to respond. Therefore, make sure your timeframes are at least 14 days from receipt of the letter. To ensure the letter is received, ask for it to be signed upon receipt.
State what will happen if no action is taken
Explain in the Letter Before Action that failure to comply or to take the necessary action as requested by the letter may lead to the start of legal proceedings.It's also important to point out that you will seek to recover from the party in breach of any legal costs associated with bringing court proceedings.
How successful are Letters Before Action?
A Letter Before Action is a cost effective way to resolve breach of contract disputes. It ensures the other party is aware of their breach and allows them to remedy the matter or pay damages before you take further action.
A well-written Letter Before Action may see the matter resolved quickly and allow you to avoid costly and lengthy court proceedings.
Do I calculate interest from the date of Letter Before Action?
Contractual damages are designed to put you back in the position you would have been if the breach of contract had not occurred and the contract was performed as per its terms. When examining whether or not you can charge interest on a late payment, check the terms of the contract first to see if an interest rate is mentioned.
If the contract is silent, the Late Payment of Commercial Debts (Interest) Act 1998 may apply, which currently permits a creditor to charge a statutory interest of 8% over the base rate.
Is a Letter Before Action a legal requirement?
Contractual disputes concerning construction, engineering, and debt are covered by Pre-Action Protocols. These Protocols are designed to help parties settle their disputes outside of court. The Court will consider non compliance with the Pre-Action Protocol when giving directions for the management of proceedings and orders for cost. Therefore, it is absolutely in your best interests to comply.
Can a Letter Before Action be sent by email?
Yes, however, be sure to keep a hard copy of the letter and any supporting documents you send to strengthen your position.
How can a professionally written Letter Before Action help?
A Letter Before Claim is the opening salvo in any legal proceedings and sets out the basis of your claim. You should avoid inconsistencies and ensure that the letter is thorough and correct (i.e. if you have referenced amounts owed, this should bear the accurate figures calculated).
For this reason, it is recommended that the Letter Before Action be written by a lawyer, especially in complex cases.
Get legal advice from LawBite
If you need to issue a Letter Before Action, our dispute resolution solicitors would be happy to assist in helping you put together an appropriate letter for your business.
We have years of experience helping businesses achieve their commercial ambitions and resolve disputes quickly and cost effectively. To find out how we can help you draft a Letter Before Action, book a free 15 minute consultation or call us on 020 3808 8314.