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Debt Demand Letter from Lawyer - What are My Options?

Discussion in 'Commercial Law Forum' started by Ricardo, 30 April 2014.

  1. Ricardo

    Ricardo Active Member

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    I've received a letter of demand from the lawyer of a woman who had quoted us $4500 to build us a new website last year who I eventually 'fired'. I accepted her quote by emailing something like "I'd like to proceed", but as the project progressed it became apparent that this woman wasn't delivering. In fact, it was ridiculous that she expected to be paid anything at all -she even asked me to go purchase the design template and stock photography images -- both of which costs were never explicitly stated or implied in the quote.

    I had already paid some 'instalments' to the full amount of the quote, and the quote said the full amount was only due upon completion (which never happened because it was never completed).I made it clear numerous times by email that I wasn't satisfied with what was being delivered, and then finally face-to-face we had an understanding that unless she could do X Y and Z. I wouldn't be able to continue, and thus I walked away with the understanding that she was effectively fired and the deal terminated. She even said something like "Well if I get to add you to my portfolio, great, but if not, that's a shame".

    Months later, I get an email saying the full amount is outstanding, which I obviously ignored.

    Now I get a lawyer's letter.

    Do you have any advice regarding contract law? Is it just a threat? Can I just ignore it and see if they really file court papers?
    What is the onus of proof here? Do I have to prove she never fulfilled her quote or does she have to prove that she did? Is mediation an option?
     
  2. John R

    John R Well-Known Member

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    Hi Ricardo,
    What did the quote and/or associated contract say in relation to terminating the contract before completion?
     
  3. Ricardo

    Ricardo Active Member

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    Thanks for the response. I am pasting relevant extracts below:

    TERMS & CONDITIONS
    Please refer to the website T&Cs on our website [redacted - available on request].com.au

    Before we commence with this project, please sign and date this page and email back to us. [Nothing was signed, however my email did say "in essence id like to proceed"]

    PAYMENT
    25% deposit is required for project to commence. Final deposit will be required upon delivery of the finished project.

    =================

    [The above is everything relevant in the quote itself, which was never signed. Here are the relevant extracts from the Terms & Conditions on the website which were mentioned by the quote, which in any case I would think are not enforceable]
    (Terms and Conditions from Website:)

    These terms and conditions shall govern the use of the [redacted] website and the purchase of any goods or services from it.

    By using [company name redacted]'s service, and signing up as a client, you agree to be legally bound by these Terms and Conditions, including those incorporated by reference. Please read these terms carefully. Acceptance of these terms and conditions stated here is a prerequisite to using the [company name redacted] service.

    ...

    12 Client Accounts
    ...
    12.3 You will remain liable for all fees during any period when Services have been discontinued or suspended due to a failure on your part to comply with these terms and conditions
    ...
    12.7 Refunds Terms are strictly 30 days in which a cancellation may be made to be eligible for any refund. After 30 days any right to a refund is forfeited
    12.8 If the client is not satisfied with the initial responses provided by [company name], [company name] will design a new set of initial designs free of charge or client may request a refund by completing the refund request form which will be provided to the client upon request. If the client chooses to be presented with a new set of initial designs, the client waives right to use any of the original initial designs presented and is no longer eligible for a refund.
    12.9 Upon timely receipt of a written request, [company name]will refund the total payment made by client, less time and or materials accumulated up to the time of cancellation. All elements of the project must then be returned to [company name]. Any usage by the client of those design elements will result in appropriate legal action. The client shall bear all costs, expenses, and reasonable attorney’s fees in any action brought to recover payment under this contract.
    12.10 Once the client requests additional revisions for any of the initial concepts, the client shall forfeit the right to the aforementioned refund. The client shall also forfeit the right to a refund if the client does not respond in a timely manner. The client shall not unreasonably withhold acceptance of, or payment for, the project.
    12.11 Cancellation refund Terms are strictly 30 days in which a cancellation may be made to be eligible for any refund. After 30 days any right to a refund is forfeited. If the client decides to cancel the project before the project has been completed, [Company name] will refund the total payment made by client, less the value of the number of hours worked on the project at the appropriate rate per hour. If this value exceeds the total payment made, the client will not be eligible for a refund.

    ...
    19. Termination
    19.1 [Company name] may discontinue services if an amount payable to [Company name] is overdue or take down a website permanently in any case where an amount payable is overdue by more than 10 days. In any such event, you remain liable for the total cost of the contract including all disbursements; unless otherwise agreed between the parties.
     
  4. John R

    John R Well-Known Member

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    Hi Ricardo,
    Because you were of the understanding that the contract was terminated (per above quote), have you considered writing a clear and concise letter/email reply back to the business (and their lawyer) informing them of the factual events to date? This may include:
    • When you raised concerns in relation to work quality compared to the agreed requirements and/or specifications;
    • When you raised concerns that the finished project was not completed to the agreed requirements and/or specifications;
    • What was said during the meeting between you and [woman] from [company name] on [date], etc.); and
    • Confirming your position (e.g. that you don't believe that the demanded amount of money is outstanding based on what had previously been said, etc.).
    Sometimes engaging a lawyer to send a letter of demand can be a low-cost threat for many businesses. You may consider reviewing the Small Business Commissioner's guide on Independent contractors – a guide to preventing and managing disputes.

    Please keep us updated with your progress.
     
  5. Ricardo

    Ricardo Active Member

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    Hi, Many thanks for your input.

    I have decided to follow your advice and send a response. Everywhere I look I've been told that I shouldn't just ignore the letter of demand, even though I'm convinced that on the balance of probabilities it was just a threat -- apparently there are even legal firms online where you can "buy" a letter of demand on their letterhead for a small fee. Going to court is likely to be time-consuming and expensive and risky for either party, so probably just a threat. However, who am I to argue with the legal fraternity ;)
    I will send a response "without prejudice" and hope and pray the matter goes away.

    I appreciate your input so I will endeavour to keep you posted on any outcome :p
     
  6. John R

    John R Well-Known Member

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    Hi Ricardo,
    Yes, many firms offer fixed price letter of demand services. That said, given the small relative size of the web development/design contract ($4,500 from your notes), it would likely be uncommercial for either party to spend more than few hours in further legal advice. Good luck and please keep us updated.
     
  7. Ricardo

    Ricardo Active Member

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    I found the form (click) she used to issue the Letter of Demand.
    It's like I thought, she just spent $39 and issued a letter of demand. There was probably little or no discussion over the merits of the debt.
     
  8. Ricardo

    Ricardo Active Member

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    (By the way, I'm also a huge Arrested Development fan).


    Here's my response which I'll be sending Monday afternoon:

    The following is made "without prejudice" to the matter concerned.

    Liability is denied.

    Reference is made to a meeting on Tuesday 10/12/2013 at 11:30am where it was mutually agreed between [Company] ("[Company]") and Ricardo ("the client") that any agreement would be terminated given the client's unsatisfaction with the progress of the project as made clear in several emails (in particular the one dated 04/12/2013), and [Company]'s failure to deliver materially on her quotation.
    The client had expressed in multiple emails the same concerns and complaints, [Company] had multiple opportunities to rectify the same, and had failed to do so.

    Reference is made in [Company]'s quote that "Final deposit will be required upon delivery of the finished project." Since the agreement was terminated, the project never finished and the finished project never delivered, the amount demanded, which is the full amount of the quote (after deducting existing payments), is disputed and liability denied.

    Reference is made to various emails from the client to [Company], expressing, inter alia:
    • concerns over unclarities in the quote
    • unhappiness over various deliverables (or lack thereof) by [Company]
    • an understanding that the full amount of the quote is only payable upon deliver of the finished project
    • costs that the client had to pay separately which were inclusions in the quote, such as a website template and images for a slider
    • queries as to how the graphic design elements of the website would be implemented, such as a 'textured background' which is listed in the quote but was never delivered.
    • etc.
    The amount demanded of $3,025.00 is further disputed by virtue of the fact that the client was asked to pay various expenses separately from the quote which were in fact inclusions in the quote, and the client complained accordingly. You will find these attached. Since these items were supposed to be inclusions in the quote, the fact that the client had to supply them warrants that those expenses would at least be deducted from the total amount of the quote. In fact such costs are normally charged with a markup and so argument could be made that the quote amount should be reduced even further.
    After accounting for just the costs, you would find the amount to be less $372.48, and therefore the amount of $3025.00 that has been stipulated as owing would be $2652.52, notwithstanding any further ancilliary charges that may have been bourne by the client such as credit card fees, PayPal fees, administrative costs, professional fees etc and notwithstanding that the liability is disputed and this discussion is without prejudice.

    [Images attached]
    You will further note, that expecting the client to pay for items separately from the quote when such items were inclusions, adds credence to the fact that the quotation was unclear and disputed, that ultimately the agreement was mutually terminated, and that [Company] failed to deliver for the client.

    The client had expressed concerns of unclarities in the quote from the beginning and any alleged acceptance he may have had of the quote was with the caveat that such unclarities would be rectified. It was put to [Company] by email, that if these aspects of the quote were not settled satisfactorily, the agreement would be cancelled and the payments already made to [Company] could be applied to her "consultations" as a good faith compromise by the client. This was not disputed in [Company]'s response.

    The quotation further stipulates inclusions that were at no point delivered or provided, such as a customised themed background (no such background was provided), Testing at a cost of $550.00 for the full project (testing, or at least full testing, which is normally done last, was never performed because the project was never completed or delivered. If it was performed, would not have been performed for the entire project, and therefore the full Testing amount cannot be claimed), "Design (3 initial concepts, 3 rounds of revisions)" at a cost of $1540.00 (Argument can be made that the template was purchased by the client, not [Company], and as such any 'design' was not performed. In any case, any design by any definition was unsatisfactory to the client and numerous complaints and instructions were made by the client, such as several requests to resize an 'image slider' which went ignored. Since the design was never finished, and any existing design duly had requested changes by the client which were never peformed, it follows that the full design costs cannot be claimed),
    "Development" at a cost of $1540.00 (Similarly, any development that may have been done could not have been based on the completed project as the completed project was never delivered, therefore the amount is disputed).

    You will note that [Company] has already been remunerated $1815.00, which together with the costs bourne by the client for items that were inclusions in the quote, bring the total remuneration for the project to $2187.48, which we feel is more than reasonable and you will note it would completely cover [Company]'s quote items for
    • Project consultation ($650.00)
    • Requirements gathering ($660.00)
    • and approximately 2/3 of "Design" (which we argue was never fulfilled ($1540.00) or at least not in entirety)
    We further feel that if the parties were to agree to mediation, it's likely that mediation would reach a similar conclusion that the remuneration was reasonable.

    In conclusion we feel this matter has been addressed and closed.
     
  9. John R

    John R Well-Known Member

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    Hi Ricardo,
    1. Good detective work to identify the Letter of Demand Service that was used.
    2. The LawAssist NSW website has key points for responding to a letter of demand (including sample responses). Your proposed response looks comprehensive at a quick glance, but without knowing the full circumstances and contract, I'd strongly suggest that you review their suggestions before sending.
    Good luck and please keep us updated with your progress!

    P.S. There's always money in the banana stand ;)
     

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