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What Is a Demand Letter?

A demand letter is a preliminary tactic used by individuals or entities as an attempt to resolve a dispute, usually over a form of payment owed by one party to another. These letters are an effort by one party involved in the dispute to reach a resolution before taking formal legal action through the courts. It is important to understand how a demand letter works, why one may need to be sent, and what you can expect after sending a demand letter.

Why Would You Need to Send a Demand Letter?

There are various reasons that a person would need to send a demand letter, and they are usually used after a failed attempt to get restitution or payment for an obligation or commitment that was previously agreed upon with another party.

Some of the most common reasons for sending a demand letter include:

  • Someone owes you money. There are various reasons that one party may owe money to another. This could be due to a mutually agreed upon contract, because of a party’s unlawful activity ended up costing another person, or various other reasons. However, there are times when a person may not pay what they owe.
  • Someone owes you an obligation in some way. It could be the case that an agreement was in place for one party to complete some kind of job for the other party, but they failed to follow through on their obligations. For example, if you agree with someone to put any roof on your house but the contractors stopped working halfway through the job, a demand letter may be necessary to force the other party to complete the job.
  • For insurance claims after an injury. Demand letters are common in personal injury cases. During the settlement negotiation process, a demand letter is often sent by the injured party to the insurance carrier of the at-fault party. The purpose of this letter is to provide the facts of the case, the total damages incurred by the victim, and the demand for compensation.

What Happens After a Demand Letter Is Sent?

After a demand letter is sent, there are various outcomes that could occur. This could include:

  • The demand is met. The best possible scenario of a demand letter is that the party you sent the letter to accepts all aspects of the demands and makes payment or restitution.
  • A counter-offer is made. The party that receives the demand letter may send back a counter-offer. While this means that they did not agree with all of the demands or amounts, it does mean that they are willing to pay something. A counter-offer does not have to be accepted, and the demanding party may choose to send back another counter-offer of their own.
  • The demand is refused. The party that received the demand letter may completely refuse any payment. In this case, it may be necessary to move forward with a lawsuit.

Do You Need an Attorney for a Demand Letter?

If you find that you need to send a demand letter to another party, you should consider securing a skilled Orange County business attorney as soon as possible. A demand letter from a law firm versus one that is sent from an individual carries much more weight. An attorney will have the legal experience necessary to properly craft the demand letter and ensure that all points are mentioned. While crafting a demand letter, an attorney will also be thinking about building a case in the event that the demand does not resolve the issue. Involving an attorney early in the process can significantly benefit your case in the long run.