Dear Attorney,

I would like to ask for assistance in drafting and sending a demand letter to someone who owes me money. Can you please let me know how much this service will cost and what the process would entail? I am hoping to resolve this matter amicably before considering any further legal action. I appreciate your help.

Sincerely,
Concerned Creditor

Insights

A demand letter is a formal document sent by a party to another to request payment or the fulfillment of a legal obligation, typically before escalating the matter to a formal lawsuit. In the Philippines, a demand letter is one of the most common legal tools used to assert one’s right to collect a debt or enforce an agreement. It serves as the initial attempt to resolve a dispute out of court and can often lead to a settlement without the need for further litigation.

Legal Basis and Purpose of a Demand Letter

A demand letter serves multiple legal purposes. It formally notifies the other party of the obligation, provides an opportunity to rectify the situation, and creates a documented record of the creditor's intent to pursue the claim. The key legal concepts relevant to demand letters include good faith in obligations and contracts, compliance in the performance of obligations under the Civil Code of the Philippines, and the general duty to fulfill contractual obligations (Art. 1159, Civil Code of the Philippines).

While the issuance of a demand letter is not explicitly required under Philippine law in every case, it is considered a prudent step, especially in civil and commercial disputes. The sending of the letter may also satisfy procedural requirements in certain disputes, such as for extrajudicial demands in cases involving damages and some breach of contract matters.

Importance in Debt Collection

A demand letter plays a crucial role in debt recovery. The letter formalizes the creditor’s request for the debtor to settle outstanding obligations. In the context of debt collection, the demand letter should be carefully crafted to include the details of the debt, including the original amount owed, any interest accrued, and the payment deadline.

In cases of small claims, the letter serves as a formal demand before resorting to legal remedies. It also lays the groundwork for potential legal action if the debtor fails to comply, thus ensuring that the creditor fulfills any requirement of exhausting all amicable means before pursuing court action.

Components of a Demand Letter

A demand letter typically includes the following:

Details of the obligation: An explanation of the debt or the nature of the obligation, including how the debtor has failed to meet their obligations.
Specific demands: This refers to the specific amount of money or action requested by the creditor or aggrieved party.
Legal consequences: A notice informing the debtor that failure to comply with the demands will result in legal action.
Deadline: A reasonable period within which the debtor should comply with the demand.

Additionally, the letter should be polite but firm, as its primary goal is to encourage voluntary compliance from the debtor.

Legal Effect of the Demand Letter

In the Philippines, while a demand letter does not guarantee the settlement of a debt, it serves as evidence of the creditor's effort to resolve the matter amicably. If the case escalates to litigation, the demand letter can be presented as proof that the debtor was given an opportunity to settle the debt without court intervention.

Furthermore, a demand letter may serve to:

Interrupt the prescriptive period for debts and claims, as outlined in Article 1155 of the Civil Code, which states that the running of the statute of limitations may be halted by a written extrajudicial demand.
Reinforce the creditor's right to claim interest, if applicable, as provided in Articles 2209 and 2210 of the Civil Code, which govern the payment of interest in cases of delay or default in performing an obligation.
Establish the timeline for the commencement of legal proceedings should the debtor fail to comply.

Legal Recourse if a Demand Letter is Ignored

If the demand letter does not result in payment or compliance, the creditor may proceed with more formal legal remedies. For debt collection, this may include:

Filing a civil case for breach of contract under the provisions of the Civil Code.
Initiating a small claims court action, if applicable, which is designed for quicker resolution of disputes involving monetary claims.
Filing a case for damages under certain circumstances, such as if the debtor’s non-payment has caused financial harm to the creditor.

In all cases, the demand letter often serves as the first formal step in the legal process. If litigation becomes necessary, having the demand letter can be valuable evidence of the creditor’s attempts to resolve the issue without going to court.

Role of a Lawyer in Drafting a Demand Letter

While there is no strict legal requirement that a demand letter be written by a lawyer, engaging the services of an attorney is highly advisable. A lawyer’s expertise ensures that the letter is properly drafted, complies with legal standards, and effectively communicates the seriousness of the situation. In addition, a demand letter issued on law firm letterhead often carries more weight and may prompt quicker action from the debtor.

An attorney can also advise on the appropriate next steps should the demand letter fail to yield the desired result. If the debtor ignores the demand, the lawyer can assist with pursuing legal action in court, guiding the creditor through the appropriate channels.

Costs Associated with a Demand Letter

The cost of having a demand letter drafted by a lawyer in the Philippines varies depending on the complexity of the case and the lawyer’s rates. While some firms offer flat fees for such services, others may charge based on the time involved or other factors such as the amount of the debt. It is best to inquire directly with a lawyer or law firm to obtain an accurate estimate.

In conclusion, a demand letter is a key tool in asserting one's rights and attempting to resolve disputes before involving the courts. Its importance in debt collection and other civil disputes cannot be understated, and it is often the first step in pursuing a legal remedy. Engaging the services of a lawyer ensures that the demand letter is properly crafted and that the creditor’s interests are protected throughout the process.