Demand Letter (FAQ)

A demand letter is a formal document prepared by one party to request action from another party to correct a wrong done. It is often sent to demand debt payment or compensation when someone breaches a contract, or fails to meet an obligation. While demand letters are usually written by a lawyer, you can also draft one for yourself.

The typical demand letter is used to solve a dispute before it goes to court, and therefore, outlines the following details:

• The nature of the dispute
• A detailed description of the dispute
• The damages suffered by the sender
• The financial demand of the sender
• A deadline for action from the recipient
• A threat of legal action

A demand letter in law is a formal document often used in tort, contract, and commercial law to negotiate dispute resolution between two parties. It demands action or cease of action from the recipient in an attempt to solve the problem before turning to litigation. In most cases, this letter is drafted by an attorney on behalf of a client or by the aggrieved party with the help of a lawyer.

An insurance demand letter is a formal document prepared by a claimant and sent to an insurance company to demand compensation for losses caused by a covered event or accident. The claimant may send the letter to their own insurance company or that of the liable party. Typically, the letter describes the accident or event, the suffered losses, and the compensation being sought.

There are two main types of insurance claims for which a claimant may send a demand letter. These are:

• Property damage – Covers losses caused by theft, fires, or natural disasters.
• Personal injury – Covers accidents that lead to bodily harm and other related losses.

A demand letter from the builder is a formal document used in the construction business to demand payment for completed projects. It informs the reader that their project is completed and cites a clause in the agreement that stipulates payment details.

These demand letters come in handy in the construction industry because most projects and payments are handled by several stakeholders. A single letter can be used to demand payment from the customer, property owner, and general contractor.

A civil demand letter is an official document used to demand compensation through the civil court system. A business may receive a 93A demand letter from an unsatisfied customer, and an injured party may send a settlement demand letter to an insurance company. Most commonly, alleged shoplifters may be served with a civil demand letter as an alternative to informing the police.

There are several actions that could follow the sending of a demand letter, most of which will depend on the action of the recipient. The four most likely scenarios include:

• The Recipient Accepts Your Demand. While this rarely happens without negotiations, some recipients will accept your demand and pay the settlement amount. This might be the case where the evidence is solid, and there is only one liable party.
• The Recipient Makes a Counteroffer. Usually the most common scenario, the insurance company or recipient may make a counteroffer, usually lower than your initial demand. You can then accept the offer or engage in negotiations.
• The Recipient Denies Your Claim. The recipient could also deny your claim and refuse to pay the compensation amount. This could be because they did not find the evidence compelling or the demand reasonable. When this happens, you can move forward with litigation.
• The Recipient Fails to Respond. Lastly, the recipient may ignore your demand letter. If this happens, you should first confirm that they received your letter, and if they did, you can file for legal action.

The response from the insurance company or recipient once a demand letter is sent will vary from case to case. Most recipients will consult an attorney who will study the evidence provided in the demand letter and advise them on the best way forward. On average, a settlement may be reached within a few weeks or several months, with some cases lasting a few years.

There are several factors that may affect how long your case takes to settle after you send a demand letter. They include:

• The amount and strength of evidence provided in the demand letter.
• The insurance company’s workload.
• The number of potentially liable parties.

If you fear your case is taking too long to settle, you should consult an attorney.

Once you receive a demand letter, you should study its contents carefully to determine whether the claim is well-founded and if you can afford the demand ask. You should also consider whether it would be cheaper to settle the case in or out of court.

Depending on your evaluation, you can then respond in one of the following ways:

• Admit you owe the money and make plans for payment
• Make a counteroffer and agree to negotiations
• Deny you owe the money and explain why
• Request more information

There is no standard procedure for sending a demand letter, which means yes, you can send one via email. That said, it is vital that you obtain proof of receipt as the defendant may later claim not to have received the letter. You can also turn to other viable options such as:

• Sending the letter via certified mail with return receipt requested.
• Paying the court to serve the letter upon the prospective defendant.

Many people contact an attorney to write their demand letter, but yes, you can do it yourself. This is especially the case when:

• You want to sue in a small claims court, where you don’t need an attorney.
• Your legal dispute is fairly simple, and you can handle it yourself
• You wish to save time and money by doing it yourself

Although you don’t need an attorney to prepare a demand letter, your document must be detailed and well organized. It should outline your dispute and the amount you are seeking.

While you can ignore a civil demand letter, it is not advisable as doing so can inhibit the remedies and defenses available to you. If you ignore a 93A demand letter from a consumer, for example, they may be able to recover double or triple the amount they lost.