Letter of Demand

In commercial transactions, a Letter of Demand is usually referring to a formal letter to the debtor asking for money to be paid in order to rectify the contractual breach that has been committed or continuing.

Although there is not a legal requirement to send a Letter of Demand through a lawyer before commencing legal action in court, however it is still a good practice to do so:

Makes life easier

•   Simple as a friendly notice to ask the debtor to comply with the claim before filing a suit against the debtor.

•   From the debtor’s response or non-response, it will give the creditor an idea to predict the debtor’s potential defense that will be raised by the debtor in the future legal suit.

•   Let the company practice good corporate governance by having a good record of material events. Keeping this piece of proper documentation always makes easier to tell a story to the stakeholders.

To establish the claim

•   Letter of Demand is a persuasive tool to elaborate the background story regarding the relationship among the parties and how the relationship has been occurred.

•   Letter of Demand also specify the debtor’s breaches or wrongful acts that has been done

•    The amount owed and demanded by the creditor.

•    It’s also able to show to the court that the creditor had exercised reasonable effort and steps in recovering the outstanding sum from the debtor.

Attempt for cost-saving

•   Try to lead the parties to a settlement by proceeding for further negotiation or propose relevant solutions, let the parties to have a last chance to resolve the matter privately.

•    Sometimes the claims are complicated or the parties may have some misunderstanding and/or misinterpretation in the contract and/or the transaction. Therefore, by serving a Letter of Demand is aimed to let the parties to clarify the misunderstanding in the transaction and subsequently to resolve it.

As mentioned above, there is no legal requirements saying that the Letter of Demand must be issued by a lawyer. Yes, you can D.I.Y. yourself! Of course, the letter that prepared by yourself most likely will carry different weight in legal perspective compare to the Letter of Demand that is issued by a lawyer that is in legal profession. Let’s meet up with your lawyer and seek further advise and clarification regarding your case.

Lastly, please do not ignore any Letter of Demand which served on you. The Court of Appeal in the case of Small Medium Enterprise Development Bank Malaysia v Lim Woon Katt [2016] 5 MLJ 220 held that: Although failure to reply to a Letter of Demand will not conclude as admission under Section 17 Evidence Act 1950, the act of ignore the Letter of Demand is still relates to the conduct under Section 8 Evidence Act 1950 and it will weaken the probative force of defendant’s defence.

Therefore, if you have been wrongfully served for a claim, you should promptly deny and clarify it, or let your lawyer to deal with it.

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