THE IMPORTANCE AND BENEFIT OF A LETTER OF DEMAND
Updated: Mar 7
Why should you consider drafting and sending a Letter of Demand before proceeding with legal action when someone owes you money?
The primary purpose of a demand is to inform the defendant that the plaintiff has a cause of action against him or her, and to persuade him or her to settle the claim, or to remove the cause of complaint within a stated time so as to avert formal proceedings from being instituted.
This puts pressure on the other party to make performance as it provides a deadline to the other party to make performance, or summons will be issued against him/her
If the other party performs in terms of the demand then the dispute is resolved quickly, without the costs of commencing legal proceedings and the costs of litigation.
It proves to show to the court that you have taken reasonable steps to resolve the dispute, before instituting the proceedings.
It shows a legal basis for your claim and the issues in dispute which letter can be placed before the Court.
It can be helpful to prove the weight of your claims against the debtor and can be used as extra evidence.
In certain instances, a letter of demand is necessary to place the debtor in mora. For example, in the event where parties failed to specify a performance date or period.
In some instances a letter of demand is necessary to institute legal actions such as in terms of the Institution of Legal Proceedings against certain Organs of State Act 40 of 2002, in terms of section 129 of the National Credit Act 34 of 2005, in terms of Section 98 of the Customs and Excise Act 91 of 1994, to name just a few.
It is important when it comes to recovery of costs. Should the Defendant pay the full amount as stated on a Summons without the Plaintiff having sent a letter of demand, the Plaintiff would have to pay the costs of the Summons him or herself. Note should be had however to the case of Theron v Theron 1973 3 SA 667 (C) where it was stated that the rule preventing the plaintiff from recovering summons costs on settlement of a claim where a prior demand was not sent cannot be written in stone.
If no specific date is stipulated in an agreement for the payment, interest on the outstanding balance will be levied on the date of postage of the letter of demand, if there is no demand, then on the date of service of the Summons. Therefore, if you were to send a letter of demand, you would be able to claim interest at an earlier date being the date when the Defendant was put into Mora.
It is always a good idea to draft and post a letter of demand before instituting legal action against a Debtor.
This article does not constitute legal advice.
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- Chanel Pereira