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How do business owners handle a contract breach?
After repeated telephone calls and emails to rectify the situation, you may need to escalate the dispute process further. Your next step is to expertly draft and send a well-crafted and strongly-worded demand letter as a final attempt to remedy the breach before taking it up with the civil court system.
However, you should understand how they work entirely to avoid making legal mistakes. The article below contains everything you need to know about using and writing demand letters.
What is a Demand Letter?
A demand letter, or letter of demand, is a legally binding legal document that businesses use to initiate breach of contract disputes before filing a case in small claim or district court. You should use demand letters as part of your regular business practice, mainly when you work with numerous contracts throughout your organization that have a risk of being breached. However, there are vital elements that your demand letters should include so that they serve their intended purpose.
Key Elements of Demand Letters
Formal demand letters are structured like any other business letter. They include a date and address as well as a signature at the bottom. What makes demand letters different is the content they contain and the way by which they communicate it.
A well-structured demand letter sends a clear message to the recipient that you wish to remedy the situation. Otherwise, you will have no choice to take legal actions against them for the breach. Communicating this information requires you to incorporate the critical elements of a demand letter.
The key elements of demand letters include:
- Factual background statement
- Liability statement
- Description of damages
- Formal demand
- Evidence attachments
Your demand letter must include evidence of your allegations. The evidence reinforces the message that you have been documenting the breach of contract and prepared to share it with a civil court judge. Sometimes, this nudge is the motivation they need to rectify the matter.
Here is an article about Demand Letters.
When To Send Demand Letters
Sending demand letters to stakeholders can be a routine part of running a business. You send a demand letter when they are in breach of their contractual obligations. You can tell that the relevant party violated their contractual obligations when you can pinpoint a specific provision not followed.
However, a demand letter is not something that you send to let a stakeholder as a first notice. The majority of demand letters are sent after informal remediation attempts as a last-ditch effort before a civil court. Use them only when you have made a good faith effort to resolve the problem by phone, email, or postal mail.
It can also help to see examples of when to send demand letters, as shown below.
Examples of when to send demand letters
Examples of when to send demand letters include:
- Example 1. Vendors not delivering projects on time
- Example 2. Customers leaving an unpaid invoice
- Example 3. Insurance companies not following policy terms
- Example 4. Business partners failing to meet obligations
- Example 5. Commercial retailers refusing to replace a faulty product
Demand letters also create a legal record that you amicably attempted to resolve the situation and gave the other party to make amends. If you need to take the case to civil court, your litigation lawyers will submit it as evidence with your petition. You must use a well-crafted demand letter to ensure that you present the most robust case possible.
Dos and Don’ts of Demand Letters
Since demand letters serve as a legal record, there are some reasonably critical best practices that you should follow. This strategy helps you avoid making legal mistakes or conflicting statements. Both of the two can result in disastrous consequences, including not collecting on a debt.
Here are six tips you should following when writing and sending demand letters:
- Tip 1 . Keep your demand letter to a necessary length . Don’t write a long letter because you think it looks better but also give yourself enough space to include all relevant facts.
- Tip 2 . Avoid getting emotional . While it is natural to feel angry over a contract breach, you should not use emotive language. Stick to the details that matter.
- Tip 3 . Offer a way to amicably solve the matter . In your closing paragraph, let the individual know what you expect and what date, along with your next steps if the conditions go unfulfilled.
- Tip 4 . Clearly state your damages . Detail precisely what legal considerations went unmet by the other party and how much they cost you. If you have incidental damages, create an itemized list.
- Tip 5 . Send your demand letter via certified mail . Signing for a certified letter is an obligation of the recipient. You will receive confirmation of their signing, which you can use when preparing evidence.
- Tip 6 . Comply with the Fair Debt Collection Practices Act (FDCPA) . There are federal regulations that your demand letter must meet when attempting to collect on a debt. If your demand letter is related to non-payment, ensure it is in compliance with the FDCPA.
As you can see, there is both an art and science to writing a demand letter. The most effective letter is the one that gets a response to solve the problem. On the other hand, the least expensive form of dispute management is that of compromise.
There are pros and cons to both strategic approaches. Business lawyers can help you navigate the complexities surrounding the legal issues of demand letters. Now that you know what to implicitly avoid and what to do, learning how to write a demand letter is your next crucial step.
Image via Pexels by Andrea
How To Write a Demand Letter
By now, you understand how critical it is to get your demand letters right since they serve a necessary legal purpose. However, it can be a formidable task when you are approaching this task for the first time.
Follow these eight steps on how to write a demand letter:
- Step 1 . Gather your evidence of the breach into a single file
- Step 2 . Open your letter by introducing yourself and why you are writing
- Step 3 . Write a paragraph or two about the dates and events that lead to the contractual breach
- Step 4 . Cite the exact laws and contract provisions that the party broke
- Step 5 . Describe your damages in one or two pages, including line itemizations
- Step 6 . Close the letter with the requirements to satisfy the dispute, a response date, and how you plan to move forward should they choose not to respond
- Step 7 . Sign your letter
- Step 8 . Attach photocopies or scans of your evidence
Writing a demand letter is not an easy task. It is hard for non-legal professionals to determine exactly which issues are in focus and what laws were broken. Plus, you could miss issues that you didn’t even know necessary were part of the breach as well.
Business lawyers offer experienced guidance in this regard. They routinely write letters on behalf of clients while accounting for their overall legal and business strategies. An illegal or poorly-written demand letter can cause you to incur legal problems, too.
Instead of leaving this essential part of your business to chance, hire business lawyers to draft and send your demand letters around the first time.
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