Running a business should be a rewarding endeavor, but even the best ones encounter a conflict from time to time. Maybe you’re owed money by a vendor, someone failed to follow through on a contractual obligation or another unforeseen incident that requires sensitive negotiation has caught you off guard.
Having a well-written demand letter template on hand will make you more prepared when an issue arises. A thorough and clear demand letter can increase your chances that the demand is met and a pricey lawsuit is avoided.
Here are some insights for understanding the ins and outs of a demand letter and what you need if a breach of contract happens.
What Is a Demand Letter?
A demand letter is a formal invitation for open discussion and dispute resolution between you and someone you are demanding something from. It can also be referred to as a Letter of Demand (LOD) or Collection Letter. It’s an official document that is usually sent after any previous informal efforts have failed.
If you have tried to amicably resolve an issue with another party but haven’t managed to come up with an outcome that you think is desirable or right, then your next step would be to draft a demand letter.
Constructing a demand letter might seem intimidating or overwhelming, which is why Incfile’s template simplifies the process and makes it easier to send the most effective letter possible. While you can send the demand letter yourself, meaning not through a lawyer, it’s important to ensure that it outlines all of the key information clearly, in case the dispute goes to court and the letter is requested for legal purposes.
The demand letter will outline the issue at hand and notify the recipient of any obligations or debts incurred that need to be put into action or repaid. It’s usually a precursor for any legal action taken and a demand letter must outline these consequences for failing to respond. There are a variety of reasons that you might need to draft a letter like this, depending on the issue.
Why Send a Demand Letter?
So you’ve tried to settle a dispute informally and politely but had no luck. Sending a demand letter is a more official way to settle a dispute and, therefore, more likely to give you your intended result. A letter of demand is also often a required step to take before filing a lawsuit. Many courts request that a formal demand be sent before filing anything official, so it’s best to do this step before escalating a dispute.
This enables the other party to have one last chance at settlement and outlines any potential consequences that you’re willing to take if an agreement is not met informally. It also encourages the other party to take the demand seriously or face legal action.
Different Types of Demand Letters
A demand letter is commonly used when requesting overdue money or a possession of assets. However, there are a few different types depending on the dispute, including:
Debt or money owed: A strong demand letter for payment is used when there are any debts or outstanding balances due. The letter should include all details of the amount, including penalties for late payments and a fair repayment request.
Breach of contract: This is when contract terms have been violated. The letter would need to outline how the other party breached the contract and the damages or consequences that have been incurred as a result.
Action required: This is commonly used when an individual or company is requesting an action from another individual or company. It might refer to a range of issues, including any previously agreed-upon terms or deliverables.
Insurance claim: This type of demand letter is used when an accident victim is trying to settle a claim with an insurance company. You would need to outline the type of claim, including any monetary losses, property damage, medical bills, etc.
Personal property: This is an official request for certain items to be returned to their rightful owner, including proof of why these items or possessions need to be returned before legal action is taken.
Unpaid wages: This is submitted by an employee to an employer demanding payment of past wages. The legalities around unpaid wages may differ between states but it is commonly used by a former employee who is demanding their last paycheck after leaving a job.
What to Include in a Demand Letter
A demand letter requires a thorough and careful assessment of the situation and your demands. The letter should include all the facts and legal conflicts so that it’s very clear to the receiving party. Don’t forget that it’s a formal letter and must be set out and typed as such.
Use a demand letter template and include the following:
Sender and recipient details and information
Description of why you’re sending the letter and the type of demand you’re making (see above for types of demand letters
Outline of the amounts owed in exact dollar figures or the action required in specific and basic terms
Proof of the demands, including any invoices, receipts, agreements, or contracts
Individual list of all damages or penalties, with a total amount or final request at the end.
Time frame for the dispute to be settled or payment to be made that is achievable and acceptable for all parties
Consequences of the demand not being met, including the intent to seek legal advice and/or file a lawsuit if payment or action is not taken
Final Tips for Writing and Sending a Demand Letter
- Be polite and professional in the letter and don’t personally attack or offend the other party. This will only reduce the likelihood of the demands actually being met.
- Make and keep multiple copies of your letter for your own record before sending it.
- Send your letter by regular and certified mail with a return receipt requested. You can also request delivery confirmation, so you know that the letter was received in case you never get a response.
- Use a demand letter template or demand letter example like this one to help you draft a professional and precise letter.
Using a demand letter template can help keep the situation from escalating and empower you to reach your intended results. Trying to resolve a dispute through an effective demand letter is a good way to reduce the risk of expensive court costs and protect your business. Download Incfile’s demand letter template today.