Five Things You Should Know about ‘Demand Letters’

November 11, 2016


In this video, you get answers to these questions:

  • What is a demand letter?
  • What are some examples of a demand letter?
  • How long is a demand letter?
  • What are the 5 important things to know about demand letters?

Demand letters are often the precursor to filing a lawsuit. But they can also be an effective tool in resolving disputes before going to court.

Commonly used by businesses, demand letters are often sent to demand money owed or restitution, but they can also be used to demand specific actions.

Having your attorney draft a demand letter can be a wise move because it gives the recipient a chance to rectify the situation without facing a lawsuit. In general, these letters lay out a brief history of disputes, demand a specific resolution by a specified deadline, provide legal justification for the demand or refer to a contract provision, and state what the sender plans to do if the demand is not met.

While the concept is simple, there are details that can help demand letters be more successful in resolving disputes, as well as protecting your interests.

Demand Letter Information

1. A demand letter shows the other party you’re serious.

Let’s say your business is engaged in a dispute with another company. You’ve made phone calls and sent e-mails. Angry words are exchanged. The other company may think you’re not going to pursue the issue legally. A demand letter makes the possibility of a lawsuit “real” for the other company. Perhaps for the first time, the other party will have to weigh the possible consequences of not complying with the demand.

2. A demand letter is generally seen by the court as a sign of good faith.

The letter shows that the party sending it wants to resolve the issue and isn’t wasting valuable judicial resources. Courts like to see that efforts have been made to settle disputes. Sending a demand letter by certified mail (with return receipt requested) and by regular mail provides proof that you made the effort. In some cases, sending a demand letter is required before going to court.

3. The information in a demand letter may be used against you.

If you do wind up in court, a judge will read the demand letter. Being insulting or threatening can hurt your case. So can demanding an unreasonable amount of money.

The wording of a demand letter is important. Certain issues fall under the Fair Debt Collections Practices Act, or other federal and state laws. You want to ensure any demands made are in compliance with all applicable laws.

You also want to ensure the wording of the letter does not result in a waiver of your rights.

4. Sending a demand letter can save you money and time in the long run.

Although it costs money to have your attorney draft a demand letter and handle a settlement, if it is successful, you’ll save more than if you go to court. Litigation is generally time consuming and expensive. Even if you win, you will likely have to pay legal fees and there is no guarantee that a court award will be collectible.

A demand letter does not have to be written by an attorney but a letter coming from a law firm is generally taken more seriously and will provide the protections listed above.

5. Never ignore a demand letter.

If you receive one, contact your attorney immediately. Some people think if they don’t respond, the sender will go away. This is usually not the case — especially if the other party has retained an attorney.

Respond and try to resolve the issue or you run the risk of going to court. And courts may not look favorably on those who simply ignore demand letters.

This doesn’t mean you have to give into all demands. You can make an affirmative defense, counterclaim, or try to settle the issue for less than the amount demanded.

Institute a policy at your business that certified mail be given to a member of management and given prompt attention. Since there is generally a deadline on demand letters, you want to make sure they are a high priority.

Conclusion

As you can see, demand letters can be an efficient option for settling disputes. They can expedite a successful outcome and avoid costly litigation. Even if you do end up filing a lawsuit, a demand letter shows the court that you reasonably tried to work with the other party to settle the problem.

Video Transcript

What is a demand letter? And what should you know if you receive a demand letter or you’re thinking about sending one? These are the questions I’ll be addressing today. I’m Aaron Hall, an attorney representing business owners in Minneapolis, Minnesota. You can learn more about me at aaronhall.com. And please see the description below for a important disclaimer.

All right, what is a demand letter? Quite simply, it’s a letter where a party is demanding something. Typically, it’s written by an attorney. And typically, the letter is demanding a person stop doing something that’s illegal or start doing something that they’re required to do. For example, I might send a letter on behalf of my client when another party in a contract is breaching the contract. And the letter would say, “On behalf of my client, we demand that you stop breaching the contract.” Or, for example, a letter might say, “We demand that you stop infringing my client’s intellectual property rights.” Maybe it’s a copyright or a trademark issue. So, those are a couple examples of a demand letter.

How long is a demand letter? Well, it could be anywhere from one to four pages, I suppose. Typically, mine are between one and three pages. One page is going to be really simple, just saying, “Look, we demand that you stop doing something,” and we’re asking them to contact us and try to work things out. It would be three or four pages if we articulate the specific legal reasons why they need to comply with the demand letter. And maybe it’s saying if you don’t, here’s what we’re going to do, and we’re going to seek attorney’s fees, and court costs, and breach of contract damages, whatever those details are that we want to communicate in a longer letter.

Here are five things to keep in mind with demand letters. A demand letters shows that the sender is serious. If a sender of a demand letter has hired an attorney, they’re clearly spending money to protect their rights and it demonstrates that they’re more serious than if they’re just emailing or calling and making the legal claims themselves.

Second, a demand letter is generally seen by the court as a sign of good faith. It demonstrate that the parties are trying to work things out instead of going straight to litigation by suing in court.

Third, keep in mind that the wording in a demand letter can be used against you. That’s often why it’s written by an attorney because you want to be very careful about what is said in a demand letter. As the old saying goes, whatever you say can and will be used against you in a court of law.

Fourth, sending a demand letter may save time and money in the long run. And that’s because if you can avoid litigation, which is expensive, stressful, and distracting, a demand letter can help you try to work things out in negotiation. Negotiation is, as a general rule, far less expensive, far quicker, and far less stressful than going to court and trying your case before a judge. A lawsuit often takes months, if not years.

Fifth, don’t ignore a demand letter. If you ignore a demand letter, you’re basically saying to the other side, “I’m not going to respond to you and try to work this out,” and that often leaves them no choice but to sue you. So by responding timely to a demand letter or having your attorney respond to one, you’re able to try to work things out without expensive and stressful litigation. I’ve written an article on my website at aaronhall.com. You can click the URL in the description below to see that. And if you have questions, check out my website. Check out the links below. And you’re welcome to subscribe to this channel for other educational videos like this. This video is subject to a disclaimer. Please see that disclaimer below. And thank you for joining me today. I’m Aaron Hall. Learn
more at aaronhall.com.

Next Steps

To learn more visit my website at aaronhall.com

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