What Is a Demand Letter?
A demand letter is a formal letter containing a legal claim or making a demand for the performance of a particular obligation. This letter is a formal notice demanding that the person to whom the letter is addressed to perform a particular legal obligation such as rectifying some identified problem, paying a sum of money, or acting on a commitment under a specified contract. This letter may be sent when money is owed, when a personal injury has occurred or when there is a breach of a contract.
A demand letter for payment is generally sent to a debtor requesting him to fulfill his outstanding payment. This letter is usually sent when the payment is long overdue by the debtor. They may be used in situations when verbal demands have not been met, and a person wants to show the seriousness of his demand. This will make the other person realize that the claimant is serious about collecting the money that is owed to him and that he will take the matter to court if necessary. It is a good method of solving a dispute without getting into time-consuming litigation.
People Involved in a Demand Letter
The people involved in a demand letter are the person who is making a claim or demand for payment and the person who is obliged to fulfill such claim or owes such payment.
Purpose of a Demand Letter
The purpose of this letter is to make sure that a certain obligation is fulfilled or certain payment is made. Demand letters are used to resolve an issue without litigation, if possible. They are not required under law, but they are used in many cases as a matter of practice.
Such letters may be used in a business environment as there is a need to maintain certain goodwill between business parties, and generally, these letters are successful in bringing about the payment or performance of the obligation. The purpose served by this letter is to show the person to whom it is addressed the serious intention of the claimant and to give a subtle warning to the person that the claimant will not shy away from a court case to protect his interests. It can also be used to show to the court that the claimant tried all possible ways to solve the dispute in a dignified manner and that approaching the courts was only a last option.
In most cases, sending a demand letter results in the problem being solved as most people would like to avoid a court case as far as possible. Hence it can be a good method to solve a dispute mutually without going to court.
Contents of a Demand Letter
A demand letter generally should contain the following important points:
- The entire background of the matter should be laid out in a clear, precise manner. All the facts that are relevant to the matter at hand must be included so as to clarify the position of the claimant.
- The payment or action that is demanded by the person drafting the letter must also be stated.
- The reason why such payment or action is demanded by the claimant must be included.
- The method or the manner in which the payment or action shall be given effect must also be mentioned.
- The legal basis for such a claim should be mentioned so as to make the opposite party aware of the right of the claimant.
- The time frame within which such payment or action shall be effected should also be mentioned.
- The letter may also contain a direct or an implied warning that if the demands mentioned in the letter are not met within the time frame, a court case will be instituted against such person.
A demand letter should be kept as short and to the point as possible. A long and poorly drafted letter may not have the same impact. As long as the serious intent of the claimant is conveyed to the opposite party, it will serve the purpose. A letter that contains inconsequential and unnecessary details will hurt the claimant’s case. A lawyer is usually not needed to draft this letter, and the claimant can do it on his own.
How to Write a Demand Letter for Payment?
The following are the steps to follow while drafting a demand letter:
- All the facts that are important to the matter at hand must be included in a clear and detailed manner. The facts should be ordered chronologically. This will help the claimant to have a record of the matter as well. Such facts should be written in a concise manner as the letter should not be too long.
- The language in demand letters should be very formal and polite. Threatening language should not be used in any circumstance. Formal language shows that the claimant is serious about pursuing his claim.
- The exact amount that is being asked for or the obligation that has to be performed must be mentioned in the letter. This is to avoid any confusion between the parties as to what is the amount owed.
- The claimant should ideally set up a time frame within which the claim should be met. This period usually varies from 14 days to 28 days but is subjective to the matter at hand.
- Any documents, correspondence, or other material that supports the claim of the claimant should be attached to the letter. This will help in showing the opposite party that the claimant has the requisite evidence to prove his claim.
- Make sure that copies of the letter are made.
- The letter should be sent by mail with a return receipt requested or by registered post. This will help in proving that the letter has been received by the opposite party.
Benefits of a Demand Letter
- Sending a demand letter in many cases leads to the settlement of the claim. Most people would like to avoid a court case as far as possible, and thus, the matter can be settled without having to go to court. This can end up saving time, money, and effort of all parties involved in the matter.
- If this letter is for the payment of a particular amount, the opposite party will have to start paying interest from the date of the letter.
- If the matter comes up in court, this letter can provide evidence of the fact that a party tried to settle the dispute outside the court and will make their facts more believable. It will also show that a fair opportunity was provided to the opposite party to fulfill the demands in a reasonable and mutually convenient manner.
- Apart from this, drafting the letter can also help the claimant in gathering whatever proof he has against the opposite party. Through this, the claimant will have a clear idea of how to deal with the matter if it comes up in court. It helps the claimant plan the entire matter in an orderly fashion, and he can understand better how tenable his claim is.
What Happens In Case of Violation?
Most demand letters contain a warning that if the demands mentioned in the letter are not met within the time frame, a court case will be instituted against such person. Hence, if the legal obligation claimed in the letter has not been performed, or the payment demanded has not been met by the person to whom the letter is addressed, then a court case can be instituted against such person to make him perform his legal obligation. If the matter is one for non-payment of a certain amount, a case can be instituted in a small claims court(1).
However, it has been noticed that this letter solves the dispute in a majority of cases. The opposite party will perform his end of the bargain or make the requisite payment as a method of evading litigation that can be time-consuming as well as expensive. If the claim is a legitimate one, a demand letter will help solve the matter in an efficient manner. Hence, the sending of a demand letter is a useful solution when the party has not complied with oral requests.
In conclusion, a demand letter may be an easy way to solve a matter without getting into a legal dispute(2). A claim made for payment of a particular amount or the performance of an obligation will be solved by this letter in most cases.
The letter will set out the entire facts of the case and the reason why the claimant believes that he is entitled to the performance of a particular legal obligation or the payment of a certain amount. In some cases, the demand letter serves as a warning to the opposite party, and they end up fulfilling their end of the deal. A legal mess can be avoided by sending this letter that contains an implied threat to sue. Hence it is always recommended that a demand letter be sent before taking recourse to the courts of law. It can end up saving time, money, and effort of all parties involved in the matter.