If you are in a contract with someone who now owes you money, the first step is to submit a formal demand letter. A formal demand letter is a piece of writing that summarizes the situation in full detail - including the amount owing, payment deadline, and the notification that you may pursue legal action without any further notice.

In some situations, a demand letter is the only step required to ensure that you receive the payment owed. However, in some situations, a formal demand letter does not result in this desired outcome. If a formal demand letter does not spur the other party to make the payment, the next step would be to initiate legal proceedings. Taking the situation to trial allows a judge or legal decision-maker to assist in the matter.

Before you get to the trial or judgment phase, it is important to know that you can settle the case at any time.  If you reach an agreement with the other party, there is no need to continue the trial. Another thing to note is that when someone owes you money, you only have two years from the date on which you expected payment to bring legal action. These two years are known as a limitation period. If you don't bring legal action within the two years following the date of expected payment, then you are barred from doing so in the future. 

Various factors can extend the limitation period, which includes contacting a lawyer to discuss your case. Contacting a lawyer can be helpful, as they can provide you advice on when a limitation period would likely expire in your particular circumstances.

Ashley Attrell, Associate at CBM Lawyers, advises clients on Corporate / Commercial law, personal injury claims, and Estate Litigation. Read more about Ashley here.