How to Prepare a Letter of Demand (Step-by-Step Guide)

Introduction

As an entry-level lawyer, one of the first assignments you most probably get, is to prepare a Letter of Demand ("LOD").

It is a simple document that yet requires much understanding of law and the practicalities around it to be crafted well.

Which is why firms tend to assess the level of a new lawyer based on their LOD.

So, what is a LOD?

Simply put, it is a letter issued to give notice to a recipient of your client's demands.

Most of the time, it is used to demand payment. Other times, it can be used to demand an action or to stop doing an act altogether.

Its primary purpose? To give a stern warning to the recipient, that should the recipient fail to comply, a legal action ensues.

However, a good LOD can serve beyond the purpose of demanding.

For the purpose of this article, I will share with you the detailed steps to prepare an LOD while bringing to your attention the considerations.

Step 1: Know the purpose of your letter and your client's desired outcome

First and foremost, before you write, assess your client's situation.

Ask yourself:

• What does your client want?
• Does your client, where possible, want to prevent the matter from going to the Court?
• What is the dynamic of the parties' relationship? Are they interested in preserving a long term relationship?
• Is there any room for negotiation?

Don't guess, don't assume, ask your client.

Find out whether there is any contractual term which makes letter of demand a prerequisite to legal action?

Although there is no law which mandates LOD, most contracts may provide a term for LOD.

Find out whether there is one and what does it provide (eg mode of service).

In that case, LOD could be a legal requirement (See Catajaya Sdn Bhd v Shoppoint Sdn Bhd & Ors [2021] 2 MLJ 374: termination was not permitted unless a notice of demand was given as provided in the contract)

Be very careful of this. Failure to issue an LOD may make your claim a non-starter. In legal sense, it means your complaint is not ready to go to Court, thence be struck off. You would want to avoid that, wouldn't you?

A note on employed language

In terms of language, I have to make a special note here.

Avoid accusative and motive language.

It might inflame a dispute which otherwise is resolvable. You could have closed a door to a settlement, or could break down the existing relationship.

Take a firm stance but be respectful. You can achieve both.

A little courtesy will go very far in encouraging the recipient to comply with your client's demands. Help your client avoid litigation and save costs.

Step 2: Get the address right

Next, make sure the address of recipient is the correct one.

You can verify a company's address by conducting a company search at Companies Commission of Malaysia portal.

If the recipient is an individual, you can do an Identification Card search. Otherwise, just use the address from their last correspondence.

Where email was used by parties to communicate previously, an LOD can also be served via email (Dato' Mohamad Salim Fateh bin Fateh Din v Nadeswaran a/l Rajah (No 1) [2012] 10 MLJ 203).

Step 3: Know your target audience

Moving on, this step may be easily overlooked but it helps to address to the right person.

The general rule is that you would want to address the legal department if it's a big company, for smaller companies, you could address the director / person in charge of the matter.

Naming the right person would increase the chances that your client's demand is actually read by the decision-maker and be given its due consideration.

Step 4: Prepare the caption / subject matter

Next, prepare the caption of your letter.

To do that, start off with "Notice of Demand / Letter of Demand".

Then, insert other the identifying elements such as the agreement, invoice number, their dates, the date of transaction, the lot number, the sum, your client's name etc.

Step 5: Introduce yourself

Now getting onto the content, at the outset, let the recipient know whom do you represent.

Example: "We refer to the above matter wherein we act for...."

Step 7: Provide the factual background

After that, provide the factual background of the demand.

Help the recipient recall what is the deal and the facts revolving it. As some parties may have selective memory, you need to clearly summarize what happened.

Take note, this is the part where your drafting skill gets tested. You would want to your facts to be complaint-focused and concise. Avoid unnecessary fluffs!

This is important for these 3 simple reasons:-

• As a professional, you want to write letters which can be understood easily. You get straight to the point.
• The lesser you say, the lesser you have to explain and prove later on.
• The lesser you say, the lesser mistake you may make.
• The lesser you say, the lesser you are bound in your position.

If you face difficulty to write concisely, you can state all that you know chronologically first and then work backwards by cutting down the fluffs (i.e. unnecessary facts).

Keep cutting down until you can't go any further.

What would be left then, would be a concise indispensable set of facts.

Where reference is made, do remember to attach the documents too.

Step 8: Name of their breach

After you clearly summarize the facts, your next task is to call out the wrongdoing of the recipient.

Be forthright and specific of the breach, whether it is non-payment, non-performance, breach of contract, say it!

Bonus Tip: If the breach is already within the recipient's knowledge, it's useful to mention despite your client's previous reminders / demands and their dates, the recipient still breached.

This will add more weight to your LOD and make any non-compliance more inexcusable.

Step 9: Show how the breach affects your client

Behind every complaint is the grievance.

It is worth pondering how the non-compliance affects your client.

It is possible that the recipient may not fully appreciate the grievance that your client is experiencing. Flesh it out and let them see how their action adversely affects your client.

This will increase the probative value of the LOD as evidence later on.

This would show that the recipient, being aware of your client's grievance, yet chose to deliberately ignore the demand. This in effect would make their choices look more unreasonable and look guilty.

(If your demand is monetary in nature, you may skip stating how the non-payment affects your client.)

Step 10: Inform them of your client's rights

This is my favourite part -- assert your client's rights!

Doing this gives your LOD a cut above the other LODs ordinarily issued by a layperson.

That said, failure to provide the legal basis for demand may cause the recipient to doubt your client's entitlement to the demands.

Therefore, show how the rights arise.

This could make your LOD sound more threatening to be taken seriously, as it shows that your client is ready to commence a legal action.

Step 11: State the DEMAND with clear call to action

The part where everyone had been waiting for -- the Demand.

Conventionally, your demand should start with "TAKE NOTICE" followed by an express and actionable demand similar to the following:-

"TAKE NOTICE that our client hereby demands, which we hereby do, that you repay our client a sum of RM450,000.00 within FOURTEEN (14) DAYS from the date hereof, failing which we have strict instructions to commence legal proceedings against you without further notice."

Set a definite deadline with clear call to action.

Strike the fear of God in them. Show them you mean business.

Step 12: Set out the consequences for failing to comply

Right after the demand, you should warn the recipient of the consequences for not complying, something to this effect:-

"TAKE FURTHER NOTICE that should the said legal proceedings be commenced, you shall be liable for all the damage, costs and expenses arising thereof"

Step 13: Sign and date it

Sign it, date it and here you go, a complete LOD at your disposal.

Other things to take note

Service: Unless it is provided in the contract, decide the most effective method to serve your LOD. Make sure you will not have any issue proving the delivery of the LOD. Keep the proof of receipt.

Payment terms: If it is a big sum, you may want to allow the recipient to pay in installments. Offer repayment alternatives.

Contact: If you want to create the greatest chance for settlement, leave your personal contact at the end of the LOD. Example: "Please do not hesitate to contact Mr Alan at 012-3456789 if there is any inquiry"

Conclusion

LOD as the first step to every dispute, if done correctly, could set the tone of the case or to avoid it altogether. Have it well-thought out will give you a greater fulfillment.

If you follow the above steps, LOD should be a manageable and enjoying assignment.

That being said, throw in some flair and enjoy!

Thanks for reading.

If you find my article helpful, kindly support by liking, commenting or sharing it with your network.

Interested to know how an actual Letter of Demand looks like?

Comment "Yes" below with your email address, I will forward you my 2 sample LODs.