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What is a Letter of Demand (LOD)?
A letter of demand (LOD) is a formal letter demanding the sender’s compliance on certain matters by the receiver. Therefore, the need to haul the receiver to contest the matter in court can be avoided.
A letter of demand can be issued for a couple of instances, for example:
- Payment of a debt that is due to the sender;
- Claiming for compensation for damaged property or personal injury; or
- Cease and desist from continuing an act. Such as defaming the sender.
If the receiver complies with the demands in the LOD, the matter is usually put to rest. However, there are instances where the sender has no other option but to pursue the matter in court. This is due to the fact that the receiver is unresponsive or in contesting the demands and claims in the LOD.
Today, we will not be diving into the nitty-gritty of pursuing a matter in court. Instead, we will be looking at why sometimes it is better to settle a matter by way of LOD and how to draft a LOD.
Why a Letter of Demand?
A letter of demand acts as a prologue to a claim in court. While we are not discouraging or dissuading you from pursuing your claim in court, it is always prudent to first consider sending out a LOD for the reasons below:
1. A quick solution to a (perhaps menial) problem
It is always better to settle it out of court if you have sufficient evidence to back up your claim of a person owing you money. At the end of the day, you just want your problem to be rectified. Escalating the problem will do no one any good, especially if it is a problem that can be solved by merely sending a letter and notifying the receiver of your problem against them.
The cost of sending out a LOD, assuming if the receiver complies and does not contest it in court, is definitely way cheaper compared to if you were to hire a solicitor to contest the matter in court. If you are confident in your letter drafting skills and know what you are doing when preparing the LOD, you might not even need to consult a solicitor nor ask them to prepare one for you, both of which will still cost you, albeit not as expensive as contesting the matter on your behalf in court.
Also, while we are not in any way saying that the cost of consulting or employing a solicitor is expensive, there are some instances your claim for compensation or money that is due to you is small. In these instances, it would be pointless for you to recover your debts or receive compensation through a court process only for you to later put it into the solicitor’s pocket.
You might end up recovering less than what you could have achieved by sending a LOD and solving the matter amicably.
Due to the nature of litigation proceedings, your claim could potentially take months before the court arrives in a verdict as to whether you are entitled to your claim. By sending out a LOD, you could potentially prevent a long drawn out battle, especially if you just want your monies or compensation or you just simply one the receiver of LOD to cease from doing a specific act, such as defaming you in public.
How to draft a LOD
Keep it simple and concise, in this regard1:
- Identify yourself;
- Give a brief explanation of your claim;
- Detail the payment that is due, compensation claimed or action that you are demanding the receiver to cease doing;
- Give a deadline for complying with your demand (usually 7-14 days);
- Threaten to file a claim in court if the receiver fails to comply with your demand;
- Attach copies of any evidence to back up your claim;
- Insert your contact details so the receiver has means to contact you in the event they want to solve the matter or your demand amicably; and
- If you are represented by a solicitor, identify the solicitor acting for you, their firm name and their contact number as to allow the receiver to contact your solicitor instead of you.
Last but not least, if you are ever a recipient of a LOD, never ignore it. In Small medium Enterprise Development Malaysia v Lim Woon Katt2, the court found that ignoring a LOD will weaken the defence you raise in court and the court will also take into account the fact that you ignored the LOD when they are determining the claims of both parties.
Need to learn more about the letter of demand?
2.  9 CLJ 73