A letter of demand is a letter sent by a creditor after they have tried but failed, to get an invoice or loan payment repaid.
The letter allows the creditor to demand repayment in written form and allows the purported debtor to act and meet the demands before further legal proceedings are instituted. Usually, a letter of demand is preceded by informal notices by the creditor asking for payment.
Informal notices may include things like phone calls, emails, and other communications with the purported debtor. Sending a letter of demand, therefore, is usually the last step to secure the creditor's legal rights before formal legal proceedings are commenced against the debtor. However, this does not mean that sending a letter of demand is a prerequisite to institute formal legal proceedings.
A letter of demand will give the debtor details of the demand. It will state things like how much money is owed, what the money is owed for, and when payment will need to be made
When should I send a letter of demand?
A demand letter serves as a formal reminder of the need for repayment. As such, demand letters should only be used as a last resort before legal proceedings are instituted.
What are the benefits of using a letter of demand?
1. Increases the likelihood of reaching a settlement A letter of demand may enable you to avoid instituting formal legal proceedings altogether against the debtor.
2. The letter can be used as extra evidence for the creditor if the creditor proceeds to file a lawsuit If the creditor decides to file a lawsuit against the debtor due to non-compliance, a letter of demand can be very useful to substantiate the creditor’s claims. As part of the legal proceeding, the creditor will have to prove the truthfulness of claims that they make. Letters of demand can be helpful in this regard in helping prove the weight of their claims against the debtor.
3. Helps the creditor maintain a positive commercial relationship with the debtor A positive consequence of a letter of demand encouraging settlement is that it can help the parties maintain a good working relationship. This would not be the case if litigation is pursued, as proceedings are highly adversarial.
Address
Unit A1, 21/F, Loyong Court Commercial Building, 212-220 Lockhart Rd, Wanchai, Hong Kong
info@acelegalservices.com
Although Acelegal is comprised of qualified lawyers, we are not a law firm or a barrister chamber.
© Ace Legal. All rights reserved.
Menu