Demand Letter for Payment (How to Write)

A Demand Letter for Payment is generally a formal, written document detailing how debt should be paid before going to court to open a dispute. A demand letter notifies an individual/company that you are considering legal actions against them. A demand letter can be viewed as an initial non-confrontational approach to recovering a debt.

The best outcome for a demand letter is that once the individual/company is put on notice, they shall simply clear off the debt or discuss the terms, and you won’t be forced to escalate the matter to court.

Generally, a Demand Letter for Payment must state the purpose for writing the letter, request Payment or action by a specific date, and the legal actions that shall be taken if they fail to respond to the letter.

The contents of a demand letter differ depending on the reasons for writing the letter. The primary things to include in a Demand letter are:

  • Party Information: You must include your name and the name of the person/company that owes you
  • Date: The date on which the debt was incurred
  • Debt Owed: A demand letter for payment must outline the reason for the debt, the total amount, the date in which the amount was to be paid.
  • Action Required: It should include a description of the action being requested. Provide a clear and definitive expectation of the payment. This consists of a date the Payment should be made.
  • Details of the debt: Provide a brief description of the nature of the debt, including:
  • The nature of the agreement
  • The amount agreed to; and
  • How the agreement has not been followed
  • Consequences for non-payment: The letter should notify the individual/company of the next step you shall take to have the issue resolved.
  • Signature: The author should personally sign the document

When Do I Need to Write Demand for Payment Letter?

Demand for Payment letter is used in any situation where someone owes you money and not paying it back as per the agreement terms. Keep in mind that every case is not the same and should be approached differently.

For instance, if you are hired and assigned a specific task to do, and you have completed the work as agreed, you shouldn’t send a demand letter immediately after completing the work. In this case, a professional invoice will suffice. However, if the payment is not made on the date agreed upon on the agreement and after making follow-ups, you still haven’t been paid, then a demand letter is appropriate.

Similarly, a demand letter for Payment would be appropriate when charged for services not rendered or products not delivered. However, before sending a demand for payment letter, you should try reaching out to the other Party either by email, phone, or any other means available at your disposal.

You can also use a demand letter when you believe a company is intentionally refusing to credit your account after making several attempts to contact and explain your situation to them.

What If You Have No Contract, But Have a Verbal Agreement?

Verbal agreements are honored by the court, provided the “statute of frauds” does not apply to that particular transaction. However, an oral agreement may be hard to prove. A court will look at the transactions and the performance leading the dispute and award a remedy accordingly.

The Consequences of Not Sending a Demand Letter

The most common consequence of not sending a demand letter for Payment is that you may never get paid. Remember, just as you have many things going on in your life, so too do the individual/company that owes you money, and there is a chance that they may have forgotten about their debt.

They may also have assumed that they have already paid you, or there might be a mix-up of your payment information, and the payment was never processed. Without sending a demand letter, you may be leaving money on the table.  

How to Present your Demand Letter

  • Be professional: when writing a demand letter, you should maintain professionalism. Use correct grammar and spelling. Avoid any unnecessary details and go straight to the point. Make sure to include your legal name, address along with the full name, address of the recipient (individual/company), and the date in which the letter was written.

You can download our preformatted templates to make it easier for you when writing. The templates will also help you in making sure that you have provided all the necessary details required in the letter.

  • Read it through the recipient’s eyes: After drafting the letter, make sure to go through it from the recipient’s perspective. Ensure that you have used polite language. Try to be as compelling as possible, making sure that there is no room for doubt.
  • Send by Certified mail: Using a certified mail with a return receipt is probably the most effective way of sending the letter as it guarantees that it was received. Should the person claim not to have received the letter, then you shall have evidence against such claims.

What Happens after a Demand Letter is Sent?

After properly drafting and sending a demand letter, expect any of the following responses from the recipient:

  1. Acknowledge the issue and comply with your request: The recipient may acknowledge their mistake in the matter and make the Payment.
  2. Reply with a counteroffer: The recipient may respond with a counteroffer. A counteroffer may be a quick way to solve the issue. You must, however, check to ascertain that the terms set for the counteroffer are beneficial to you; otherwise, you can refuse and continue with the negotiation process.
  3. Reply with a debt verification letter: The recipient may send you a debt verification letter to ask you to verify and provide a proof of your claimed debt.
  4. Ignore your letter: The recipient may decide to ignore your letter. If you don’t get any response in two weeks, then the best option would be to either try and contact them again or commence legal proceedings with the help of your attorney is they are unreachable.

Will my Demand Letter be Used in Court?

If the recipient fails to heed to the demands stipulated in the letter, then you can opt to take the matter to a court of law. You can present the demand letter to the judge as proof to show that you tried resolving the matter out of court.

Benefits of Sending a Demand Letter for Payment

  • A demand letter summarizes your case by providing a detailed description of the job and the facts at issue in your case.
  • A demand letter for payment is usually a show of good faith. And can be used in a court of law as proof that you tried settling the case out of court. And may qualify you for other remedies; for instance, the court may rule that you be compensated for the attorney fees or collect penalties.
  • A demand letter promotes settlement and gives the Party in breach a final opportunity to make things right without litigation.

Can I send a Demand Letter for Payment without a Lawyer?

Even though you can send a demand letter on your own, having an attorney send your letter has its advantages including:

  • A demand letter from an attorney carries more weight than a formal letter.
  • Having your attorney send the letter makes it clear to the breaching Party that you are ready to pursue legal actions against them should they fail to heed to your demands
  • An attorney can write the demand letter in a way that takes advantage of laws providing for the collection of other remedies.
  • A letter from an attorney is likely to be taken more seriously compared to a formal letter.

Sample Demand Letter for Payment

[Your Name]

[Address]

[City, State, Zip code]

[Email]

Date:

[Name of the Breaching Party]

[Address]

[City, State, Zip code]

Dear: __ [Name of Breaching Party]

This demand letter for payment is in line with the loan that I gave you on the [Date] in the amount of _ [include dollar amount of the loan] for the down payment of your new home. At that time, we agreed that the loan was to be repaid on or before_____________ [Date].

You have failed to make any payments towards this loan. It has been [no of months/years] since the loan was to be repaid in full. I request that upon receiving this letter, you make the full payment of the amount.

Failure to make the payments in full before [Period], I reserve the rights to take further legal action against you to recover the debt without any offering any other notice to you.

This letter shall be provided as evidence in court should you fail to pay with the demands made. If this matter escalates to court, you shall be required to pay all the applicable interest, filing, and attorney’s fees, any other related expenses.

Your immediate response to this demand letter will be appreciated.

Regards,

__ [Your Name]

__ [Phone Number]

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