A Demand for Payment Letter, or Demand Letter for Payment, is a formal, written document detailing a debt owed. A Demand Letter for Payment also outlines how a debt should be paid, and the consequences if it isn’t repaid by a certain date.
In many jurisdictions, when first recovering a debt, parties first try to recover it through means other than small claims court or a lawsuit. Think of a demand for payment letter as an initial, non-confrontational approach to recovering a debt. It usually includes the following elements:
- Date debt was incurred: the date the unpaid was completed;
- Details of debt: facts describing the nature of the debt;
- Expectations for payment: clear and definitive expectations of the payment, including a date the payment should be made by;
- Consequences for non-payment: for example, if an author intends to sue for an unpaid debt, this should be included in the letter.
1. When a Demand For Payment Letter is Needed
Demand for payment letters should be used in any circumstance where someone owes you money. Remember, every situation is fact-specific and should be approached differently. For example, if you are a building contractor and have completed work as agreed, you shouldn’t send a demand for payment on the date the work is completed. At that point, a professional invoice template will do.
However, if you aren’t paid within the time stated in the agreement, a demand for payment becomes appropriate. Similarly, if you were charged for a service that wasn’t provided or a product that wasn’t delivered, you are entitled to a refund. There is no need to send a demand for payment when a simple phone call will suffice. Typically, when companies accidentally charge you, a phone call will rectify the situation.
However, if you have contacted the company and explained the situation, and they have indicated they will fix it, but haven’t done so in a reasonable amount of time, a demand for payment may be appropriate. Also, if a company refuses to credit your account and you believe it is appropriate that you be credited, a demand for payment may be in order. All in all, you should use a demand for payment letter in any case where you believe you have a legal claim regarding a debt owed.
Because your demand for payment will be used in a court claim, be polite, stick to the facts, and make your expectations clear without being unreasonable or disrespectful.
2. The Consequences of Not Using a Demand for Payment Letter
There are a couple of potential consequences for not sending a demand for payment. The first, and most obvious, is you may never get paid. Consider, just as you have many things going on in your life, so too do the people that owe you money and it’s possible they simply forgot about their debt. Perhaps they assumed their spouse had paid the debt. Without sending a demand letter, you may be leaving money on the table.
Additionally, you may not be able to proceed with a lawsuit if you have not first filed a demand for payment.
When filing a lawsuit, a plaintiff is required to provide a factual basis for the claim. This factual basis is often identical to the facts listed in the demand letter. Consequently, writing a demand for payment prior to filing a suit doesn’t create additional work. Rather, it reduces work, as often the letter itself will result in payment, and when it doesn’t, you have the information you need already reduced to writing.
3. Demand Letter for Payment Common Uses
The two most common situations for using a demand for payment are:
- When someone owes you money, and
- When someone has charged you money for something you didn’t receive (or, didn’t receive as advertised).
When Someone Owes You Money
There are both personal and professional situations where a demand for payment might be used when someone owes you money. For example, perhaps you lent someone money. After several months, they stopped paying on the agreed terms. A demand for payment would be appropriate in this situation. Alternatively, perhaps you provided professional services, such as designing a website or building a retaining wall. After sending your invoices, with a due date, you hear nothing. This would be a perfect situation for using a demand for payment letter.
When Someone Charged You Money You Don’t Owe
With the use of the internet and automated payments, sometimes, messages get lost. Consequently, you may be auto-billed for a service you didn’t receive. For example, you may subscribe to a weekly housekeeping service. If your housekeeping professional becomes ill and doesn’t find a replacement, you may have been billed by the billing service, despite not receiving the service. A polite phone call should fix this.
However, sometimes that’s not always the case. In this case, a demand for payment is appropriate. In other cases, you may have ordered something that arrived in an unusable condition. If you belong to the fruit of the month club, you expect not only to get fruit, but also fruit that is not spoiled. Or maybe you belong to a shaving club that is supposed to send razors each month. If your fruit arrives spoiled, or razors broken, the logical first step is to contact the retailer to attempt to rectify the situation.
Such remedy could be sending you a fresh batch of fruit, or new razors, or by crediting your account. If neither occurs, and your contract has clearly outlined the expectations of both parties, a demand for payment may be appropriate.
Sometimes, requests for customer service are handled by employees who don’t have a lot of power or incentive. A demand for payment may be the first time a concern is elevated from a line customer service representative to a manager, or a member of the legal team.
4. What Should Be Included in a Demand Letter For Payment
There is certain fundamental information which should be included in a demand for payment letter. Such information is detailed below:
- Party information: both the person owed the debt, and the person owing the debt, should be identified.
- Date debt was incurred: the date the unpaid for work was completed; or
- Date debt was improperly charged: if the dispute surrounds a charge for services not rendered or other improper charge, the date of the charge;
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Details of debt: facts describing the nature of the debt, including:
- The nature of the agreement;
- The amount agreed to; and
- How the agreement was not followed.
- Details of prior attempts to collect the debt: information such as calls made, emails sent, invoices mailed;
- Expectations for payment: expectations should be clear and definitive, including a date the payment must be made by;
- Consequences for non-payment: if the author intends to sue if the debt isn’t paid, this should be included in the demand for payment; and
- Signature: the author should personally sign the document.
Below is sample language often included in a demand for payment letter:
| Party Information | From: Cam Contractor To: Joe Blow |
| Date Debt Was Incurred | On June 15, 2017, I completed the installation of your patio. |
| Details of Debt | Our agreement was that I would install your patio for $5,000. You agreed to pay me $2500 upfront, and another $2500 upon completion. While you did, in fact, pay me $2500 up front, you have not paid me the $2500 due upon completion. |
| Details of Prior Attempts to Collect the Debt | On June 16, 2017, I sent you an invoice for the remaining balance of $2500, with a due date of July 15, 2017. On July 16, 2017, I sent you another invoice marked “Past Due – Please pay upon receipt.” |
| Expectations of Payment | I expect the balance due of $2500 to be paid within 14 days, which is August 14, 2017. |
| Consequences for Non-Payment | If I do not receive payment by August 14, 2017, I will have no choice but to file a claim in small claims court for the amount due and owing, $2500, as well as any reasonable costs allowed by law. |
As a reference, people often refer to this letter by other names:
- Letter of Demand
- Demand Letter
- Demand Letter For Payment
- Final Demand For Payment
Sample Demand Letter for Payment
The sample demand for payment letter below details a request by ‘Randy Dryer’ to ‘Emilio Martinez’ for rent payment that is past due. The letter informs Emilio Martinez what late fees he owes, as well as how many days he has before Randy Dryer pursues legal action.
Be sure to send a demand for payment using a method that allows you to obtain proof of receipt. This can be return service requested, certified mail, or through a signature program offered by a private delivery service.
5. Demand for Payment Letter FAQs
Do I need to have a demand for payment notarized?
No. A demand for payment does not need to be notarized. However, if you file a claim in court, you may be required to swear to the truth of the allegations you make about the facts of your case. Consequently, just as with an affidavit, you should limit your demand for payment to facts. Your demand may later be admitted into evidence in a court of law.
What happens if I send a demand, and the recipient wants to negotiate terms of payment?
You are free to negotiate payment or stand firm on your original conditions. Only you can decide which course of action is best for you. In any event, make sure to document this exchange in writing.