A demand letter is a formal letter that demands the other person (or corporation) performs a legal obligation, such as fixing a problem, paying a sum of money, or honoring a contract. The letter describes the agreement between parties and gives the recipient a chance to fix the issue without being taken to court.
A demand letter is not legally required in order to start a lawsuit, but it is often a good idea because if the recipient agrees with the demand, everyone avoids the stress of going to court.
Anyone can write and send a demand letter. It does not need to be from a lawyer or other professional. There is no set format for a demand letter.
What to Include in a Demand Letter:
- Date and the recipient's contact information
- Legal phrase WITHOUT PREJUDICE to protect you from the contents of the letter being used against you later in court
- Summary of the agreement and the problem or issue
- Demand for a specific relief or payment
- Deadline stating when the matter must be settled
- A reasonable amount of time to comply
- That you intend to start a lawsuit if no action is taken
- Sender's contact information and signature
- Fair and specified terms
Responding to a Demand Letter
If you receive a demand letter, it does not mean that you are being sued. It does not mean that a claim has been filed in court. It does mean that the other party may sue you if you do not meet the terms described in the demand letter. Read the terms of the letter carefully to see if you are willing and able to comply. You may need to get legal advice from a lawyer to help you decide how to respond.
If you think you can negotiate a settlement or establish payment terms, contact the writer of the demand letter as soon as possible. You may wish to respond letting them know if you agree to their terms or the reasons why not. You can also propose an alternative settlement option.
For example, if the demand letter is asking for a repayment of a debt of $6,000 by the end of the month you may propose a payment schedule for smaller amounts over a longer period of time.