Letter of Demand

Letter of Demand

A civil lawsuit usually starts with a letter of demand (LOD) issued by a lawyer demanding the other party to make compensation or rectifying the mistake made. Before the lawsuit, is it a must for a LOD to be sent out? The answer is NO!!

But readers may find that usually your lawyer will advise you to send a LOD to the other party as “a polite greeting” before filing a lawsuit. The main reason is to save you time and money. Just think about it, if your case is very well-founded and has a high chance of winning whereby the other party does not have much room for any defence, then the other party may negotiate with you to meet your demands after receiving the LOD.

“The LOD is usually also a formal demand, requiring the other party to compensate for your loss or rectifying the error within a specified time (usually within 14 days) and this LOD will usually later become an exhibit to prove that you have formally requested and “reminded” the other party to compensate or resolve the dispute.”

The fact is that since LOD is just an initial litigation procedure, the legal fees to be incurred are not much, which is much lesser from the legal fees for a lawsuit. What initiated a lawsuit is usually because the other party insists on his position and is unwilling to take a step back or to compromise to the LOD. Therefore, after the LOD is issued, the other party must seriously think that if there is no reconciliation, then he would have to prepare legal fees to engage a lawyer to fight the lawsuit.

It is not an exaggeration to say that the LOD is a legal warning letter; because usually in the LOD, we will require the other party to meet the client’s requirements within a specified time, otherwise the other party must bear the additional lawyer fees and compensation amount, interest, etc.

To be honest, everyone can write LOD without having to be written by a lawyer. But if the LOD is issued by law firm, usually the other party will have the sense of alertness and understanding that the demand is a serious demand; it is not something that can be ignored and put aside. Usually the lawyer can clearly and professionally state and list the legal arguments that the client has in the LOD.

In some special cases, we must issue a LOD before litigation. For example, a bank must issue a formal LOD before suing a guarantor; or when the bank wants to apply for liquidation of a company, etc. Generally speaking, there is no legal requirement that we must notify the other party before starting a lawsuit. But obviously, it is not economical to start a lawsuit without notifying the other party. Before you win the lawsuit, you have to spend money on lawyers which is a so-called self-injury! Hence if the other party is willing to compensate and settle after you issue the LOD, why not do it.

Of course, one kind of rice breeds hundreds of people. Some people will be very upset after receiving the LOD and choose to reply quickly or negotiate a settlement or he will immediately hire a lawyer to solemnly reply to the LOD but there are people who are naturally fearless, accept LOD as usual; or have the thinking I don’t mind so let’s fight and see who wins. In the latter case, we usually have to let the client know whether the lawsuit is worth fighting and whether the other party has enough assets to compensate you for the loss and the cost of the suit if we win.

Of course, it does not mean that if the other party does not reply to the LOD, he will lose the right and opportunity to defend in the future. Just because you reply does not mean that the other party must compensate your request. However, in the 2016 Court of Appeal case, Small Medium Enterprise Development Bank Malaysia v Lim Woon Katt, the Court of Appeal ruled that if a person chooses not to respond to LOD, his actions will make his case more unreliable. We must know that in civil litigation, as long as the court trusts one of the parties more, even if the difference is only 51% vs 49%, the more trusted party will win the case. The Court of Appeal also stated that “in ordinary commercial affairs, if one party is wrongly accused by the other, then he will naturally deny the accusation.” Therefore, according to ordinary commercial affairs, if you do not respond to LOD, then your behavior is likely to express and imply that you know what you are wrong!

Therefore, if you unfortunately receive the LOD “white bomb”, please do not think that you can ignore it and choose to throw it away immediately. The correct way is to immediately consult a lawyer’s opinion to decide whether to deny it in whole or in part, or negotiate a settlement with the other party. If you want to be a hero in the court by misjudging the situation for the sake of a moment, then you must pay money and time to fulfill your heroic dream!


Note: This article is for reference only and does not constitute legal advice. Therefore, if readers have any legal questions or needs, they should seek professional legal advice. If the reader suffers any loss by relying on this article, the author will not be held responsible.

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