A demand letter is a formal written document used to assert a legal right or claim against another party. It typically serves as a precursor to potential legal action, aiming to resolve disputes without resorting to court proceedings. The letter is often from an attorney's office and provides the core of the demand. Most often, a lawyer will provide the client's statement of facts or their position, offering a clear and concise summary of the events or circumstances that led to the grievance. The demand letter will often include additional background information, including specific dates, locations, and relevant actions or transactions that form the basis of the claim. It will further outline the the sender's legal position, referencing applicable laws, contracts, or agreements that support their claim.
Failing to respond promptly to a demand letter can have serious consequences for you or your business. Typically, demand letters require a written reply within a specified timeframe. Failure to respond may prompt the sender, often a law firm, to pursue legal action against you by filing in court. While nothing obligates you to respond before the deadline, understanding the timeframe can indicate the sender's readiness to escalate the matter legally or willingness to settle, depending on the situation. Pay close attention to the tone of the letter as it can be a strong indication of whether negotiation is feasible. Often, people disregard demand letters, even if sent via certified mail through the post office. Not reading or signing for the letter can leave the sender with little choice but to initiate legal proceedings sooner than anticipated. Once the sender invests in legal representation and files a formal complaint, halting the process becomes much more challenging and undoubtedly expensive. In legal proceedings, the sender will often argue that they provided a reasonable opportunity to resolve the matter amicably, highlighting your failure to engage with their efforts in good faith.
Importantly, a certified letter (even the ones you don't open or sign for) counts as service of process in most states. This means you may have been sued, and you won't know it was more than a demand letter until it's too late (e.g., they've seized your bank account or taken other assets). Legal process can be served via certified mail. Surprise! You have been sued!
Below is a checklist of what to do when you receive a demand letter:
The first step is to stay calm. You're going to be upset, but panic or anger can cloud your judgment. In this moment, it's best to do nothing but carefully read the letter in its entirety to understand the nature of the demand. Look for key details such as the sender's identity, the reason for the demand, and any deadlines mentioned. Don't email, text, or call friends and family, as everything you say and do could create evidence if litigation ensues. Think before you act.
Ensure that the demand letter is legitimate. Check the sender’s credentials and verify the details. Fraudulent demand letters are not uncommon, so it's important to confirm that the claim is genuine. For instance, scam letters targeting trademark owners are not uncommon, aiming to trick them into paying a fraudulent invoice demands. While these letters may appear genuine, they often aren't. Moreover, contacting the number provided on such a demand letter without verifying its legitimacy could make you vulnerable to fraud, potentially resulting in the disclosure of personal information you should not share.
Keep a record of all communications related to the demand letter. This includes the letter itself, any emails, phone calls, or subsequent letters. Proper documentation can be vital if the matter escalates to legal proceedings. If it's a legitimate demand, gather all historical documents related to the demand as well. At this stage, you have a legal obligation to preserve all evidence that may relate to this potential claim. Intentionally destroying evidence at this stage is called spoliation and can be held against you in court. The judge might infer that the destroyed evidence could have been incriminating or damaging to your argument or defense. As a result, the judge might rule in favor of the opposing party or impose penalties or sanctions against you for the destruction of evidence.
Understand your legal rights and obligations concerning the demand. Depending on the nature of the claim, this might involve reviewing contracts, agreements, or relevant laws. It’s essential to know where you stand before proceeding taking any next steps. Once you've gathered all relevant materials, validated the demand letter, and assessed your rights and obligations, it's time to promptly consult an attorney.
Consulting with an attorney early and often is a wise move when dealing with a demand letter. A professional contract review lawyer can provide clarity on the situation, help you understand your options, and assist in drafting a response. A skilled lawyer will help you evaluate the validity of the claim, and consider whether the demands are reasonable and justified. If the claim appears baseless or inflated, you lawyer can write a responsive letter which may end the dispute.
Formulating a well-thought-out response is crucial. Your attorney can help craft a letter that addresses the demands appropriately. Your response might include accepting the claim, negotiating terms, or denying the claims if they are unfounded. It's very possible your lawyer may advise you to ignore the demand entirely; however, that should only be done in particular circumstances where your lawyer has conducted the necessary due diligence to determine its a scam or spam.
In many cases, the demand letter is a starting point for negotiations. Be open to discussing the matter with the sender to find a mutually acceptable resolution. Negotiation can often prevent the need for more formal legal action. Sometimes, settling the matter out of court can be the best course of action. Weigh the pros and cons of settlement versus litigation. Settlements can save time, money, and stress, but ensure that any settlement agreement is fair and comprehensive. Sure, nobody wants to pay money to settle a demand; however, sometimes it's the right thing to do and saves costs in the long run. Check your principles versus your practical side and go with your gut on any reasonable settlement
If the issue cannot be resolved through negotiation or settlement, be prepared for the possibility of legal action. Work closely with your attorney to prepare your case and understand the legal process ahead. If litigation is inevitable, consider being the first to file litigation on the demand by seeking a declaratory action that you do not owe it. Being the first to file makes you the Plaintiff. This means, as the Plaintiff, you will have the first and last word in any final trial on the demand (e.g., Plaintiffs always open and close the case at trial). Rest assured, the demand sender will not be happy if you take the lead on what was otherwise their case. In law, strategy is everything!
At Wilson Whitaker Rynell, our
contract review attorneys know that receiving a demand letter can be daunting, but by staying calm, understanding your rights, and seeking professional advice, you can navigate the situation effectively.
Always take demand letters seriously and respond promptly to protect your interests.
You absolutely need a release of some form before giving over anything of value in response to a demand letter. Lawyers refer to an agreement to settle a dispute as a 'release' because it involves one party giving up, or releasing, their claim against another in exchange for some act, usually a payment of money. For example, if Sarah's car is damaged when Michael accidentally backs into it in a parking lot, Sarah might agree to release Michael from liability and not pursue legal action if he agrees to pay $1,500 for the repair costs. If court action hasn't yet been initiated, a signed settlement agreement and release in exchange for the agreed payment would suffice. If a lawsuit has already been filed, the exchange of the signed settlement and payment should occur before the lawsuit is dismissed.
Looking for expert legal guidance in Dallas, Frisco, Plano, or throughout Texas for your breach of contract issues? Look no further than Wilson Whitaker Rynell. Our seasoned team of contract lawyers specializes in breach of contract cases and can provide you with the assistance you need, including drafting and sending demand letters. Contact us or call us at 972-248-8080 today for comprehensive contract dispute legal support tailored to your specific needs and let us help you resolve your contract disputes effectively.
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