Writing a Proper Demand Letter in Breach of Contract

What Is a Demand Letter?

A demand letter is a concise, strongly written document that sets out the basis for a demand. In the business world, a demand letter can often be an important tool in a dispute. An attorney will normally send a demand letter to another party before proceeding to file a lawsuit. A demand letter puts the other party on notice of a claim. Demand letters are often written to avoid further dispute. Moreover, a demand letter may result in a resolution without the need for litigation . For example, if a defendant has done something without fault, a demand letter may persuade the defendant to remedy the situation. Therefore, a demand letter can be the first step to resolve a conflict without going to court. This is crucial when a significant amount of money is owed, as sending a threat of litigation can sometimes push the other party away. Thus, a good demand letter will try to anticipate how the other party will respond. A demand letter therefore is important part of resolving a breach of contract case.

What Does a Demand Letter for Breach of Contract Need?

A demand letter should include three primary components: (1) identification of the basic terms of the agreement/covenant as relevant to the parties; (2) the reason for the breach and any other details which would pertain to a determination of liability and (3) the "demands" of the party sending the letter in order to avoid further controversy or litigation. If the contract/agreement/covenant in question deals with the sale of goods, for example, then it is likely that the Uniform Commercial Code will apply. The Uniform Commercial Code will be controlling for any contracts in a commercial setting and demand letters would need to address that code. Likewise, if the parties work under federal regulations, those regulations will have to apply as well. In any event, the letter must address the law as controlling and additional requirements that the law requires to be included.
The letter should be written in good faith and without intent to abuse process. The intent should be to promote an effort at settlement without litigation. A listing of all details of the agreement/covenant must be attached to the letter in order to have documentation of the contract/agreement/covenant. If there are specific terms of the contract that are critical to the alleged breach, then those must be highlighted.

How Do You Write a Demand Letter?

When it comes to breach of contract claims, whether you are the aggrieved party or are on the other side of the fence, a well-drafted demand letter can go a long way. While you may have a million things on your plate in dealing with the breach and trying to mitigate damages, crafting an effective demand letter should not be overlooked.
Here are some of the steps to consider:
Keep it simple – Use clear, concise, and unambiguous language. Don’t use a bunch of legal jargon (keep the legalese to a minimum).
State your facts as clearly as possible – Tell the story of how and why the breach took place. Leave nothing to the imagination. State dates, times and places.
Keep calm and keep your cool – Demand letters are not the place to go into a litany of complaints. Stick to the facts but do so in a professional and unemotional tone. No one will take you seriously if you come across as a hothead.
Cite specific provisions of the contract that were breached – If you want to be taken seriously, cite the specific provisions of the contract that the other side has breached. It shows you did some work and researched the issue.
Clearly set out what it is that you are demanding – Putting the demands in writing is important. You may think that it is obvious but you would be surprised how often it is not. Be clear about what it is that you are demanding, so that there can be no argument about it.
A breach of contract demand letter can be extremely helpful for both sides and can often result in quick settlement. However, you should also know what to do in the event it doesn’t.

Legal Guidance and Advice

If a party to a contract does not fulfill the obligations as prescribed, it could give rise to a breach of contract claim, and a likely cause of action if the non-breaching party were to commence legal proceedings in Court. When preparing a demand letter for breach of contract, the author should be cautious that they possess sufficient information to inform the reader that they have breached, or that perhaps the reader in the circumstances has grounds to terminate the contract. This will assist that the necessary legal elements are there (described below) in case legal proceedings are commenced.
The necessary legal elements to a breach of contract are as follows:

• The existence of an agreement
• A contractual period
• A breach of one of the terms of the agreement
• Damages to the non-breaching party

For example, if there was an agreement between a consumer and ABC Limited for a goods or service (i.e. materials or services for repair to a vehicle), and the consumer failed to pay the invoice, and the consumer does not dispute the invoice nor reference other issues with the service provided, then damages arising from the consumer’s failure to pay the invoice allowed ABC Limited to repair a 3rd party’s vehicle that resulted in damages to ABC Limited.
The most common defenses to breach of contract are a claimed misunderstanding of the terms, a claimed lack of capacity or ability to perform the contractual obligation, the claimed failure to perform is justifiable, etc. The court would have to interpret the contract, and the parties’ intentions from the surrounding circumstances when the agreement was made, which is the rule in interpreting contracts, and decide if the actions giving rise to the demand letter (usually the alleged failure or inability to pay or deliver) is justified or not, as described above.
A consumer can give notice of the alleged breach or inability within a reasonable time. If returned by mail, depending on the method of delivery, the letter is presumed to have been given when it would be delivered in the ordinary course of business. This means: an email sent on a Tuesday at noon is presumed to be received the same day, whereas if an email is sent Friday after 5 PM, it could be presumed to be received the next business day. This will depend on the reasonable time frame provided under R 1.22 of the Alberta Rules of Court, and is a broad guideline, as well as the circumstances of the case .
What happens if you don’t follow the formalities required by law, or the "sticks" referred to above? Well, the Court may reject all or some of your claims or defenses. Specifically, in Alberta, at s. 3-50 of the Civil Practice Note, it is stated: "Before a trial certificate may be issued in a proceedings, the party requesting the certificate shall provide the Court with all evidence they wish to be considered by the Court in deciding whether to issue the certificate." This is concerning because the Court may decide the party requesting the certificate does not meet the requirements. In Landreville v. Government of Alberta, 2009 ABQB 295 (CanLII), the trial judge found Landreville guilty of fraudulent misrepresentation of her situation with the RAICI (Regional Assessment and Intake Centre Inc.) and the Crown, by making a settlement offer to the Crown when she knew the RAICI was to be acting upon her request to release her documents to the Crown at that time. The Court also dismissed Landreville’s contingent claim against the Government of Alberta on the grounds that she had not complied with the Statutory Notice provisions of the Freedom of Information and the Protection of Privacy Act (FOIPP). Under s. 3-18 of the APCR, the restraint of the Crown is mentioned, specifically stating that: "[e]xcept for subsection (2) of these rules, and unless otherwise provided by these rules, the rules do not displace any rule or requirement for practice or procedure imposed by a statute, regulation or rule." Therefore, the Crown was restrained by the lack of compliance to the FOIPP, as the rule of law (R 1.2(1)), as it may apply to the associated legislation (FOIPP).
While a letter of demand does not have to be delivered directly and personally to the respective individual, it is up to interpretation what will be seen as a routine business procedure and legitimate methods of delivering an email or registered letter sent by regular mail. So to reduce the risk of rejection of claims or defenses, the letters of demand should be delivered at a time appropriate and with the appropriate wording to ensure that the action complies with the rules. As with any letter of demand, if in doubt about the letter of demand drafted, and particularly on a letter of demand for a breach of contract, legal advice should be sought before heading to court.

How to Respond to a Demand Letter

The first thing you should do after receiving a demand letter is to contact an attorney. A demand letter is a contractual dispute. Despite what someone with no experience in the civil legal process might say, they are not meant to be "scare tactics" or a bully pulpit. Contractual disputes are based on material facts. Do not be surprised or caught off guard when your attorney immediately tells you that he needs to know the facts, the reason for the contract, what specifically went wrong (on both sides), and what your damages are. Because it costs money for your attorney to research, write and send letters to the other party, it is unlikely that your attorney will forgo a detailed investigation of the facts and firing off a letter at the quote of the adversary to "see what sticks." You will probably have to spend some time gathering the facts, narrating your side of the story, organizing your documents and preparing for a few tough questions from your attorney to put your story in a legal context.
Once the detailed facts are gathered, your attorney will evaluate whether the other party has breached the contract. If what the other party did justifies ending the contract and attempting to recover damages, your attorney will write a letter to the other party to explain the reasons why you have terminated the contract. The best possible outcome is for both parties to agree that the contract was broken and all contract claims against the other will be dismissed.
If the parties are unable to agree, the contract will still be broken if a substantial amount of evidence shows that a breach occurred. That evidence will need a sympathetic audience. This might mean mediation or some type of arbitration. An attorney familiar with demand letters can be an invaluable resource in drafting a demand letter which gives a wide audience the most information about the dispute.

What Will Happen Next

A well-crafted demand letter will often elicit a response from the other party. That response may take the form of a counter-offer, a demand for more information, or revised terms to the proposed resolution. If the other party is sensible, it may simply comply with the demands on its own terms. Ideally, you want the demands in your demand letter to be met. If so, you can move on without further legal action.
Unfortunately, it is not uncommon for communications to break down and for negotiations to stall. In fact, if either party feels there could be any significant measure of uncertainty as to the merits of the opposing side’s claims or defenses , both parties likely reason more information will be needed before litigation becomes necessary. You may have experienced this in other situations, but that does not mean a negotiated settlement is out of the question.
Parties may also agree to litigate several issues and negotiate the rest. Alternative dispute resolution methods, such as mediation or arbitration, are also still options at this stage. The demand letter may resolve the issue entirely, or may be one step on the road to a potential outcome or next step.