A Demand Letter Can Be Your Best First Step in Resolving a Business Dispute
When business relationships fall apart, it can be challenging to know what to do next. Perhaps a contract has been breached, someone owes you money, or your intellectual property is being infringed. Whatever the issue, a carefully drafted demand letter is often your smartest first step.
A demand letter is more than just a request—it’s a statement of intent. It shows the other party that you are serious, prepared to sue if necessary, and likely to prevail. It also makes clear that ignoring your demand will cost them far more than resolving the matter now.
While you might be tempted to write the letter yourself, having an experienced attorney draft it can make all the difference. Here’s why demand letters are so effective—and why they’re worth doing right.
What Exactly Is a Demand Letter?
A demand letter is a formal written request asking another party to resolve a dispute, comply with an agreement, or remedy a legal violation. It lays out the problem, explains your legal rights, and specifies what needs to happen to avoid further action.
But a demand letter is more than a formality. It’s a strategic tool that can often prevent costly litigation. If ignored, it can serve as key evidence in court, demonstrating that you made a good-faith effort to resolve the dispute amicably.
What Makes a Strong Demand Letter?
A strong demand letter achieves four critical objectives:
- Communicates Strength: It shows the other party that you are prepared to take the matter to court and that your case is strong.
- Emphasizes Consequences: It makes clear that litigation will cost the other party far more than resolving the issue now.
- Demonstrates Professionalism: It uses precise legal language, references applicable laws and contracts, and avoids emotional or inflammatory statements.
- Provides a Real Solution: It offers a practical path for resolution. For example, if the other party cannot pay $3 million immediately, the letter might propose an installment plan or other feasible alternatives.
A professionally drafted demand letter signals that your position has been carefully considered and supported by legal expertise. It sets the tone for productive negotiations—or lays the groundwork for litigation.
Why You Shouldn’t Write It Yourself
It’s tempting to save money by writing your own demand letter, but this approach is often counterproductive. Here’s why:
Missed Legal Nuances
Non-lawyers often fail to include essential details or frame their arguments effectively. For instance, we had a client whose self-written demand letter was ignored. Upon review, we discovered that they had omitted three critical contract provisions:
- Interest accrued at 18% per year on unpaid invoices.
- The prevailing party would be entitled to attorneys’ fees.
- The lawsuit against the Boston company on the other side could be brought in Seattle.
We redrafted the demand letter with these points included, and the dispute was resolved within three weeks. The other party agreed to an installment plan—with interest.
Emotional Writing
When emotions run high, it’s easy to write something overly aggressive or inflammatory, which can backfire. A demand letter written by an attorney strikes the right balance between firmness and professionalism.
Lack of Authority
A letter from an attorney carries more weight. It signals that you are serious and ready to act. Many clients have told us that receiving an attorney’s demand letter made them realize delaying or ignoring the issue was no longer an option.
Why Demand Letters Take Time to Craft
Clients often ask how long it takes to write a demand letter. While the actual drafting usually takes only a few hours, the real time is spent figuring out what to say.
Crafting an effective demand letter requires reviewing key documents, analyzing the facts, and identifying the strongest legal arguments. This preparation ensures the letter is persuasive, accurate, and aligned with your overall legal strategy.
For instance, a letter that simply says, “You owe my client $3 million—pay up!” is unlikely to achieve results. A well-researched and carefully written letter, on the other hand, can often compel the other side to act.
Do Demand Letters Always Work?
No, demand letters don’t always work—and they’re less effective now than they were ten years ago. However, they remain a valuable step in most cases.
Here’s why: the time spent preparing a demand letter is never wasted. Nearly every minute of research and analysis that goes into drafting a demand letter can be repurposed for drafting a complaint if the matter escalates to litigation.
If there’s a chance the demand letter might work—and you’re ready to sue if it doesn’t—sending one almost always makes sense. When successful, a demand letter can save significant time and money compared to litigating a case where both sides are bound by the court’s calendar.
Demand Letters in Real Life
Example 1: Breach of Contract
A computer contractor abandoned a project halfway through. Instead of immediately filing a lawsuit, we sent a demand letter outlining the breach, citing various contract provisions and cases, and giving the contractor a deadline to remedy the situation.
Result: The contractor hired its own lawyer and we worked with that lawyer to get the project back on track with some new guidelines in place. The contractor resumed work and completed the project, avoiding litigation. Amazingly enough, our client hired them again for another project.
Example 2: Trademark Infringement
A competitor started using a logo nearly identical to one of our clients. We sent a demand letter citing trademark law, demanding the competitor immediately cease using the logo, and proposing a monetary settlement.
Result: The competitor immediately agreed to stop using the logo, pay all of our attorneys’ fees and offered our client a hefty percentage of proceeds from their remaining inventory with our client’s logo on it. Our client accepted this offer and though it was less than they likely would have gotten had they sued, it avoided a costly lawsuit, gave quick resolution, and mostly achieved the desired outcome.
Conclusion
Whether you’re dealing with a breach of contract, intellectual property infringement, or another legal dispute, a professionally drafted demand letter can be a powerful tool. It establishes your position, encourages resolution, and often avoids the need for litigation.
