The public seems to be very confused about what formal demand letters are and what they are intended to do. Here we will clarify exactly what you can expect from having such letters issued to a counterparty by your lawyer.
A demand letter is generally, but not always, drafted by an attorney requesting payment of money, warning of potential legal action, or seeking some type of action to be taken by the recipient (“cease and desist”), or all the above. Such letters are sometimes required by law to give notice to the other party and allow them a chance to settle the dispute.
These letters are not legal orders and have no mandatory compliance requirements; they are merely intended to put the other party on notice that some kind of legal obligation exists which the other party may or may not have been aware of. Generally such letters are used to kick off either negotiations for settlement or further legal action such as a lawsuit or alternative dispute resolution.
Drafting demand letters is as much art as it is legal practice because some letters result in better results than others, therefore not any lawyer can or should be used to draft such a letter, but one with extensive experience and success in getting results for clients solely using such letters without further action, which would be a major expense to the client. Because further action will result in a payday for the attorney, many lawyers are not very serious about drafting strong demand letters, which is another type of conflict of interest.
What do these letters contain? Basically a statement of who the client is, who the attorney is, a statement of facts, a listing of legal obligations of the recipient under law or contract, and a demand. Generally a conclusion will state that all rights are reserved by the issuer of the letter and further legal action may follow. A request to reach out to the sender to settle the matter is fairly standard.
Although generally no longer than one to three pages such letters may take hours to draft, therefore costs will range from $500-$1500 or more. Some people erroneously believe such letters only take a few minutes to draft and should cost no more than a few hundred dollars. Unfortunately, which this may be true for dilettante letter drafters, lawyers who have drafted thousands of such letters have a specific skillset which has produced results. This firm, for example, has obtained payments in the hundreds of thousands of dollars for its clients merely resulting from the issuance of a single demand letter. Therefore, the cost of a letter has nothing to do with its value if the result is favorable for the client. Additionally, some letters take hours of research so as to have a legal basis to support the claims made.
Demand letters are never guaranteed to obtain any specific result, and may result in no response from the recipient, in which case the client must decide if further action will be taken. Favorable results from an issued letter depend on the facts of the claim, the supporting law, and the skill of the drafter, apart from the willingness of the recipient to settle the matter amicably.
Sometimes a response is received from the recipient or recipient’s legal counsel, which will deny the claims made in the letter and assert their own counter demands and claims. If there is such an impasse, then further legal action sometimes may be necessary which may result in the necessary impetus for a reasonable settlement. Other times, it is simply not cost feasible to pursue additional action and the matter is left unresolved.
Hopefully the above description has been informative. If you have a need for a demand letter issued or a response to a demand letter received from a 3rd party regarding a business matter, please don’t hesitate to reach out through the contact form under the tab above.