Demand For Payment Letter

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.

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.

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.

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;
• 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:

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