A well-crafted demand letter can resolve disputes without litigation. Understanding when and how to use them maximizes their effectiveness.
Key Takeaways
- Sets the tone for potential litigation
- May be required before filing suit
- Can trigger insurance coverage
- Preserves the relationship option
Elements of Effective Demand Letters
- Clear statement of facts
- Legal basis for claims
- Specific demand
- Deadline for response
- Consequences of non-response
"Without Prejudice": The Strategy
You will often see demand letters marked "Settlement Communication - For Settlement Purposes Only" or "Without Prejudice." This ensures that if the dispute goes to court, the judge/jury never sees the letter. Why? Because you might offer to settle for less than you are owed just to be done with it. You don't want the jury to see that offer and think "oh, they think it's only worth $5k" when you are suing for $10k.
Avoiding Extortion
There is a fine line between a Demand Letter and Extortion. You can say "Pay me $10k or I will sue you" (legal). You CANNOT say "Pay me $10k or I will report your tax fraud to the IRS" or "I will post embarrassing photos of you." Threatening criminal action or reputation destruction to gain leverage in a civil dispute is illegal and can get lawyers disbarred.
Statute of Limitations
Before sending a demand, check the clock. In DC, the statute of limitations for breach of contract is 3 years. If you wait 3 years and 1 day to demand payment, your claim is dead. Sending a demand letter does *not* pause the statute of limitations; only filing a lawsuit does (tolling).
Protect Your Business from Costly Legal Mistakes
A handshake deal is fine until things go wrong. Whether you're starting a company, negotiating a contract, or protecting your IP, you need clear legal agreements. Don't risk your hard work.
We offer a free 15-minute consultation to review your business needs.
Get Your Free Consultation NowDo I need a lawyer to send one?
Technically no, but a letter on law firm letterhead signals you are ready to sue. A letter from "gmail.com" is often ignored.
Disclaimer: This article is for general information only and is not legal advice.