What Is a Demand Letter?
In most cases, a contract has terms which must be followed by all parties involved. At various times and to various extents the contract is going to be breached, or in other words one party is going to do something to undermine the integrity of the contract. The first step that must be taken is to send a letter announcing your intention to pursue damages for the contract breach. This document is called a demand letter. A demand letter is an initial step that allows you, the aggrieved party, to announce your intent to sue to the aggrieved party. Most lawsuits have a statute of limitations, or a specific time period under which the plaintiff must file their claim . A demand letter is vital in proving that the plaintiff acted within the statute of limitations, and therefore has a right to a trial by jury under Indiana law. An well-drafted demand letter can avoid litigation and save time and legal fees. Under a contract, many types of damages can occur when one party fundamentally fails to hold up their end of the deal. Whether it is estimated profits that are lost due to a delay or the outright suffering of expenses directly related to the loss the damages are real and quantifiable. A demand letter is an important step in the recovery of these injuries then, announcing your intent to file a lawsuit to recover the damages which have been incurred by the plaintiff.
Important Components of a Demand Letter
Essential to any effective demand letter is that it clearly sets forth the terms of the contract and the specific nature of the breach. The letter must clearly and concisely describe the conduct of the breaching party that amounts to a repudiation of the agreement, as well as outline the precise provisions of the contract that are at issue. Furthermore, the aggrieved party must clearly set forth their demands in conjunction with the repudiation of the agreement. In doing so, the aggrieved party should be careful not to unduly expand the scope of the demands. Finally, the demand letter must establish a reasonable time period for the breaching party to respond and do so in good faith, as well as inform the breaching party of the consequences of failing to do so. The time for response should generally be at least 30 days, but the facts of the case may necessitate a shorter or longer period. Thoroughly establishing the deadlines as part of the demand letter will help minimize or preclude questions or arguments over the timing issues.
Sample Demand Letter Template
Below is a sample demand letter for breach of contract in the context of an auto repair agreement. It can be easily adapted to fit other situations.
Date:
Name:
Address:
City, State Zip:
Re: Demand Letter for Breach of Contract
Dear (Name):
I am writing to make a formal demand for compensation for the damages I have suffered due to your breach of our contract.
In June, you and I entered into an agreement wherein you undertook to make certain repairs to my car. You said the repairs would take three days and would not cost more than $600. Based on that representation, I left my car with you. When a week had passed and I had not heard anything, I called you. You told me the repairs would take longer than expected, but you would have my car ready in a few days.
A week after that conversation, I arrived at your shop. Upon my arrival, I found a sign posted on your door stating you were closed for vacation. No one bothered to call me. I was without my vehicle for a full 10 days. I was forced to rent a car at my own expense in order to go to work. This rental car cost me $300.
Upon my return to your shop, it became clear you had far exceeded the $600 estimate we discussed. I tend to agree that you got carried away. For instance, you replaced an alternator that was perfectly good, and you overcharged me for the work performed. According to my complaint, the total cost for the work was $1,200.
Keeping in mind that I had made it clear prior to talking to you that the repair amount was a major issue, I trusted you when you assured me that you would do the work for less than $600. I was disappointed when, despite my best efforts, you continually delayed completing the work and then tried to charge me $1,200. I would not have agreed to allow you to do the work had I known you were going to exceed the original figure by two times.
At this time, I am making a formal demand that you pay me the amount I was forced to spend on a rental. In addition, I am making a demand for the overage incurred over the $600 limit and hope that you will agree to discount the total bill somewhat. In light of what occurred, I think a total refund of the $300 is reasonable in addition to a discount of at least $200 off my bill for the work performed on my car.
If you fail to respond positively to this demand, I will have no other recourse but to pursue legal action to recover my damages. Please understand this is something I do not want to have to do. I wish only to be restored to the position I was in prior to the breach of our contract. However, should you not respond positively to this letter, I will have no other choice but to pursue my legal options.
Sincerely,
Signature
Printed Name
Legal Notes and Risks
It’s possible to get too carried away with these demand letters. You don’t want the letter to sound (or be) cloaked in a threat. The letter should evoke the specter of litigation without implicitly saying so, lest the other side take you as very much on edge. And you want the letter to give enough time for the other side to come back to you with an offer to resolve the matter.
The statutory bases for breach of contract are both contract and tort. The contracts can be either oral or written. When a plaintiff brings a claim for breach of contract, they must also plead and prove that it has suffered damages as a result of the breach. If the breaching party is liable for the breach, they may also be liable for consequential tort damages which may occur after the breach. Under the contract statute, the statute of limitations or length of time to bring the cause of action is generally 4 years from when the alleged breach occurred.
When drafting a breach of contract demand letter , there is some language that must and must not be used to avoid problems with the statute of limitations. The demand letter should mention the particular breach of the contract which occurred, as well as point out any specific language in the contract that has been violated. When it comes to what the demand letter should avoid, this is when the potential problem with the statute of limitations arises. It is essential that the letter does not make any express or implied request to the other party to cure the breach of contract. The letter should simply present the apparent breach of the contract, and let it be known that the contract is going to be pursued as a remedy. If the letter makes a request to cure or repair the breach, it shows that the party waives the breach and that the statute of limitations has not run. It also indicates to the other party that it has not yet suffered any damages. When the party makes a request to cure the breach, the time for the statute of limitations will not run until the cure period expires.
Writing a Demanding Demand Letter
If you have suffered monetary damages as part of your breach of contract claim, and you want to issue a demand letter to the other party regarding damages, it is important to draft an effective demand letter. A letter that is poorly worded or that threatens legal action at the first opportunity could limit your recovery or even send the case to costly litigation. To draft an effective letter, consider the following: Persuade to Act: The most effective demand letters are persuasive and direct: "We would like to resolve this issue amicably. Accordingly, we are confident that you will agree to this demand/settlement of this matter." Providing the recipient with an incentive to resolve the issue (such as a discount on the goods or a refund) can lead to a resolution that is favorable to you. Send the Letter Through an Attorney: If you have already hired a lawyer for the underlying case, have him or her send the demand letter. If you issue the letter through an attorney, it conveys that you are serious about pursuing the claim. If you have not yet retained legal counsel, it is best to hire an attorney before sending a demand letter. An experienced attorney will use his or her experience in evaluating the other party’s legal exposure and issuing a demand that will be persuasive without being unreasonable. An overly aggressive letter could be viewed as a threat, which is hardly persuasive. Tell the Truth: Finally, do not threaten the defendant in a demand letter. Instead, give an honest and accurate representation of the damages that were caused by the breach of contract. The more honest the demand letter, the more persuasive it will be to the other party.
What Next if the Demand Letter is Not Answered
If the demand letter does not elicit a response, the next step is to determine the reason for that lack of response. Sometimes, it is simply a matter of the person being late in responding. The best way to find out if this is the case is to follow up with a phone call and a second letter. If the phone call reveals that the person did not receive the demand letter, the failure to respond may simply be an oversight. In these cases, it is most likely that the person will respond right away or will explain why the matter is not even appropriate for a demand letter. On the other hand, if the phone call reveals that the matter has previously been resolved or that the complaint is outside the person’s area of responsibility, the job on our end is finished and some ontogeny is avoided.
However, if that is not the case, and more commonly, the phone call reveals reasons why the demand letter was ignored, the options become somewhat severe. If the person states that the complaint is justified but the client must wait its turn before payment, there are only a few options available. As a practical matter, a failure to pay, whether based on a lack of money or simply because the client has not put the invoice for the work at which the case is directed into proper prioritization, may be an appropriate basis for escalation to collection via a lawsuit . This is especially true in cases where the demand letter indicates that the complaint is justified. It is almost certain that the client’s lack of response was not caused by a desire to leverage improper business advantages over the claim in question. It is also almost certain that the client’s admission of liability removes any liability exposure and gives the client an opportunity to settle out of court to avoid being sued. It only follows that a failure to pay in this instance without any justification will result in escalation to litigation and the creation of the presumption that the client’s conduct is improper. In cases where the client states that it is not responsible for the complained-of action even after admissions of liability where that is apparent, litigation may be the only option, although possibly not the only one, that the business attorney can recommend. This is a difficult decision and should be thought through carefully before proceeding. Sometimes a follow-up letter will be enough. However, in any event, escalation needs to follow the original demand letter if there is no response.