Overview to Letters of Demand

Most of us have been in a situation where someone has borrowed money from us and has forgotten to pay us back. While most of us will forgive our friends, family and even business partners when times are good the situation can become frustrating when the sum of money loaned is larger and begins to affect our personal lives or even the running of our business.

If you are in such a situation where your personal life or when your business is affected by debts one of the first steps that you can take towards recovering is by sending the person who borrowed the money (debtor) a Letter of Demand (“LoD”).

What is a Letter of Demand?

A Letter of Demand is a letter that usually drafted by a lawyer (but not necessarily), which demands the repayment of the debt in full or for the performance of a particular obligation. This letter is usually sent after you have tried albeit unsuccessfully to recover your debt or the amount outstanding on an invoice.

The LoD is used to provide notice of a party’s intention to enforce their rights, such as the recovery of debt (personal loans or when there has been a breach of a contract in a business relationship). It is also worth noting that if you anticipate that the debtor will breach an agreement or contract you can also send them a LoD.

What is the purpose of a Letter of Demand?

A well-drafted Letter of Demand has many purposes such  as:

  1. It clearly informs the debtor the amount or obligation that is owed or due to be performed and when the amount or the duty has to be repaid or performed.
  2. It informs the debtor that you are aware of your legal rights and the debtor’s obligation to repay the debt or perform certain obligations as required in the contract or the agreement between parties.
  3. The act of sending such a letter informs the debtor that you are taking a serious approach towards having the debt repaid or the obligation performed.
  4. If further informs the debtor that you may intend to pursue legal proceedings against them if they fail to repay the debt or perform the obligation as required.
  5. It will also substantiate your claim in Court (if you pursue your claim through legal proceedings) that you had tried to settle your matter amicably and had given your debtor sufficient notice of your intention.

Who can send a Letter of Demand

Anyone can draft and send their own Letter of Demand, however having a lawyer draft your letter has the following benefits:

  1. It shows the debtor that you have been informed and advised by a legally trained professional about your rights and obligation before you had pursued your claim.
  2. The letter sent will appear with the law firm’s letterhead, this can sometimes encourage the debtor to respond.  Sending a letter of demand through a lawyer is an assertive approach (i.e forceful and intimidating). It will to a certain extent act upon the mind of the debtor and typically they will respond to such a demand.

What to take note off when drafting a Letter of Demand

  1. Have you tried a friendly approach in order to recover your debt?
  2. Are your demands clear and accurate?
  3. Was your letter sent out by registered post? (This can be used as evidence in Court).
  4. Are you demanding for anything that was not part of the contract or the agreement?
  5. Have you attached copies of any relevant documents or supporting documents (i.e., Invoices, previously sent late payment letters)

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