What is a demand letter? What are its benefits?

A demand letter is a formal letter used to demand that another individual or entity fulfil a legal obligation, which may include rectifying a problem, making a payment, or upholding a contractual commitment. This written communication outlines the terms of the agreement between the involved parties and allows the recipient to address the issue before resorting to legal action. Demand letters outline the damages, the demand for restitution, a deadline and any consequences if the conditions are unmet.

See also: How to write letter of intent to lease commercial property?

While initiating a lawsuit does not strictly necessitate a demand letter, it is commonly advisable as reaching an agreement through the demand letter can spare all parties the challenges associated with court proceedings.

Creating and dispatching a demand letter is not restricted to legal professionals; anyone can undertake this task, although lawyers mainly write it. Additionally, no rigid format must be followed when composing a demand letter.

 

Demand letter: What to include?

1. The purpose of the letter
2. Date, time, and the recipient’s contact information
3. The parties involved 
4. Legal phrase WITHOUT PREJUDICE to protect you from the contents of the letter being used against you later in court
5. Summary of the agreement and the problem or issue
6. Demand for a specific relief or payment
7. Deadline stating when the matter must be settled
8. A reasonable amount of time to comply 
9. That you intend to start a lawsuit if no action is taken
10. Sender’s contact information and signature
11. Fair and specified terms

Read also: What is an allotment letter in property purchase?

 

Demand letter: Response 

1. Receiving a demand letter does not indicate an immediate lawsuit or the filing of a claim in court. However, it signals the potential for the other party to take legal action if the terms outlined in the demand letter are not met. It is crucial to carefully review the stipulations in the letter to assess your willingness and ability to comply. Seeking legal advice from a lawyer may be necessary to make informed decisions on how best to respond. 
2. Most demand letters contain directions on how to resolve the issue, including payment details and deadlines.
3. The recipient may follow through with the writer’s request by fulfilling the conditions outlined in the letter. On the other hand, the recipient may respond with a letter denying the claims. The recipient may also choose to ignore the demand letter. In the last two cases, the sender may take legal action, bringing a lawsuit in court to remedy the situation.

 

Demand letter: Benefits 

1. Cost-effective measure: Drafting and sending demand letters is more cost-effective and accessible than immediately filing lawsuits. It serves as an economical initial step in resolving disputes.
2. Formal communication: A demand letter is a formal and official communication that articulates your concerns about a situation, potentially persuading the recipient to respond in kind.
3. Clarity to prevent misunderstandings: By explicitly outlining your complaints, requests, and the legal basis for your claim, a demand letter eliminates room for misunderstandings or misinterpretations.
4. Facilitates settlement: Well-crafted demand letters signal your readiness to pursue legal action, encouraging the other party to consider settling the matter outside the courtroom.
5. Preservation of relationships: In cases involving ongoing connections between organisations or individuals, a demand letter allows you to assert your rights while maintaining communication, potentially avoiding unnecessary hostility.
6. Legal notification: A demand letter serves as written notice to the recipient that their actions or inactions are causing a problem, fulfilling legal requirements for notice in relevant cases.
7. Effective negotiation tool: A demand letter can act as a powerful tool for negotiation, opening the door to discussions and considerations of alternative solutions and concessions.
8. Demonstrates serious intent: A demand letter communicates your seriousness in addressing the situation and conveys the intention to pursue further legal action if necessary, prompting the opposing party to engage in dialogue.
9. Legal documentation: The demand letter becomes a part of the legal record, offering a reference point in future legal proceedings such as litigation or arbitration.
10. Confirmation of receipt: Sending a demand letter via certified mail or with proof of delivery ensures confirmation of receipt by the recipient, eliminating any uncertainties about whether the message was received.

 

Demand letters: When to send them?

During business operations, it’s common to regularly dispatch demand letters to stakeholders. These letters are typically issued when a breach of contractual obligations is evident when a specific provision has been disregarded.

Nevertheless, a demand letter differs from the initial communication sent to a stakeholder. Instead, it is typically employed as a final recourse following informal attempts at resolution. It is advisable to use demand letters only after making genuine efforts to address the issue through phone calls, emails, or postal correspondence.

 

Demand letter: Tips to follow while writing 

1. Keep your demand letter to the necessary length.
2. Avoid getting emotional.
3. Offer a way to solve the matter amicably.
4. Clearly state your damages.
5. Send your demand letter via certified mail.

 

FAQs

When is it appropriate to send a demand letter?

A demand letter is usually sent when one party believes the other has violated a legal obligation, such as breaching a contract or causing harm. It is often used after unsuccessful informal attempts to resolve the issue.

Is a demand letter legally required before filing a lawsuit?

No, a demand letter is not legally required, but it is often advisable. It can demonstrate good faith efforts to resolve the matter before resorting to legal action and may lead to a settlement without going to court.

Can anyone send a demand letter, or must it be from a lawyer?

Anyone can send a demand letter; it must not be from a lawyer. However, seeking legal advice before sending one can be beneficial in ensuring it is well-crafted and has a solid legal foundation.

How should a recipient respond to a demand letter?

The recipient should carefully review the letter, seek legal advice, and respond on time. Ignoring a demand letter may lead to legal action being taken against them.

What are the advantages of using a demand letter?

Demand letters are cost-effective, formal, and can prevent misunderstandings. They can also serve as a negotiation tool, help preserve relationships, and become part of the legal record for future reference.

Are there alternatives to sending a demand letter?

Yes, attempts at informal resolution through communication channels like phone calls, emails, or postal mail should be made before resorting to a demand letter. Mediation or arbitration may also be considered as alternatives.

How should a demand letter be delivered?

A demand letter can be delivered via various methods, including certified mail, email, or through legal representatives. Choosing a delivery method with proof of receipt is advisable to confirm the recipient's acknowledgement.

What happens if the recipient does not respond to a demand letter?

If the recipient does not respond to a demand letter, the sender may pursue legal action, such as filing a lawsuit. In such cases, the demand letter can be used as evidence in the legal proceedings.

Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com