business resources
6 Reasons a Letter Before Action Is the First Step to Resolving Business Disputes
10 Sept 2025
There will always be arguments in business, whether it's over unpaid bills, broken contracts, or partners who don't understand each other. There is a structured and successful way to settle disagreements before going to court. It's called the letter before action (LBA).
This is an official letter sent from one party to another that explains the problem, gives a legal reason for the claim, and makes it clear that the problem needs to be fixed. An LBA lets the recipient know that a lawsuit is possible, but the sender is also giving them one last chance to settle the problem without going to court.
1. Shows Seriousness and Legal Intent
One of the best things about a letter before action is that it shows that you are serious. When one side of a business dispute thinks the other side isn't going to pursue the issue, the dispute often drags on.
That is obvious after an LBA. It conveys a precept suggesting that a lawyer’s help is probably at hand, and the matter is not trivial, nor is it benign. The gravity of the matter may press the other party to resolve the matter by paying a bill, initiating negotiations, or even just offering an adequate explanation.
2. Creates a Chance to Negotiate and Settle Early
Litigation is not only expensive, but it also takes a lot of time and resources that could be better used building a business. An LBA gives both sides a structured way to settle their differences before they get into long court fights.
Letters are often the start of a conversation because they make the problem and desired answer clear. For a detailed explanation of what a letter before action involves, including best practices for drafting one, businesses can refer to expert guidance.
3. Fulfils Legal and Procedural Pre-Action Protocols
In England and Wales, pre-action protocols are a part of the rules for civil proceedings. Their function is to facilitate communication between the parties and assist them in reaching an agreement before commencing court action. It is often not only a good idea but also required by these rules to send a letter before taking action.
Judges assume that both parties have made reasonable attempts at resolving the issue before trial. A party that neglects this and loses is at risk of punitive sanctions, which might include a larger payment than the loss incurred.
4. Clarifies Claims and Evidence for Both Parties
Positions that aren’t clear can make disagreements very confusing very fast, and an LBA counters this by setting out the claim, facts, and supporting evidence so both sides understand the issues and what is needed to resolve them. As the Government report illustrates, in County Courts, the proportion of judgments which were in default amounts to 93% or above in the period of April-June 2025.
This underlines the importance of early clarity and index miss engagement to enable prevention of escalation, and the crucial resolve before court avoidance and prompt resolution.
In addition, HMCTS reports that “more than half” of small claims that entered voluntary mediation settled, and recent monthly data show settlement rates commonly in the 33%-52% range, evidence that structured, pre?action clarity often leads to compromise without a hearing.
5. Encourages Fair, Transparent Conduct
Sorting out business disputes isn’t simply a matter of the law. They also involve the Nation's trust and reputation. The LBA encourages all parties to constructively engage in a process that is both accessible and balanced. The addressee can freely and honestly respond to the initial position.
For the sender, this means that court action is not an automatic next step. Honest conversations generally reduce hostilities, particularly in business relationships where cooperation is an ongoing necessity.
6. Prepares Parties for Court if Necessary
An LBA's purpose is not just avoiding the possibility of legal action, it also prepares a party for the possibility of having to appear before a court. It outlines the position of the claimant, the case, and the evidence that the claimant has, as well as the attempts that were made at settlement.
Courts prefer that parties genuinely attempt to compromise before bringing a case to court. That’s why the LBA gives the claimant a stronger footing. It is the receiver's failure to reply which is the inaction that might be deemed unreasonable.
Conclusion
A lot of things need to happen before you even get to sending a letter, before action. The first action is relatively low-cost, highly professional, and assists in the prevention of court action. Its value is beyond description as it depicts seriousness and satisfies the legal requirement of notice and articulation of the claim.
The reputation, time, cost, and money relations due to the LBA, if these claims are all highly reduced. With the help of professionals in this category, the drafting and sending of these letters helps maximise the impact of the letter in the setting of the stage to assist in resolution.
