I received a demand letter. What is it, and how bad is it?

1.1What a demand letter is

A demand letter is a written statement of a claim, sent before any lawsuit, that says what the sender believes you did, what law or contract it breached, what the sender wants, and by when. It can come from a lawyer, from the person with the claim, or from a company acting for them. It can concern money, conduct or both. The common feature is that it asks you to do something voluntarily now so that the sender does not have to ask a court to make you do it later.

It is private correspondence. No court has seen it, nothing is on a docket, and no judge has decided anything. That cuts both ways: the sender cannot enforce it, and you cannot assume it is wrong because it was not filed.

1.2The five things to find in the first ten minutes

1. Who sent it. The exact name on the letterhead, the address, the domain. Chapter 12 explains how to verify each.
2. What they say you did. The facts: dates, documents, calls, images, names. The more specific, the more likely the sender has records.
3. What law they rely on. A statute, a contract clause, a common-law claim. Write it down; you will look it up.
4. What they want. A sum, a change in conduct, a signed undertaking, documents, or a combination.
5. The deadline. The date by which they want a reply, and what they say happens after it.

Everything else in the letter, including the tone, can wait.

1.3How to judge how serious it is

Four questions sort most letters.

A letter that scores high on the first two is one to take seriously whatever its tone. A letter that is vague, cites no law, and demands payment by a method that cannot be traced is probably not a claim at all; see chapter 12 on verification.

1.4The most common demand letters a small business receives

Part II of this guide has a chapter on each. In rough order of how often a small business sees them:

• Telemarketing and texting: calls or texts made without consent or to numbers on the Do Not Call Registry, with fixed statutory damages per call.¹
• Website accessibility: a website that cannot be used with a screen reader, under Title III of the ADA.²
• Copyright and image licensing: a photograph or text used without a licence.³
• Wage and employment: overtime, misclassification, final pay.⁴
• Patent and trademark: a name, logo or feature that someone says is theirs.
• Unpaid invoices: in both directions.

1.5What to do this week

1. Write the deadline down, and a second date a week earlier for your own decision.
2. Preserve every record connected to the claim. Tell staff in writing. Nothing is deleted.
3. Stop the conduct complained of, where that costs nothing: take the image down, suppress the phone numbers, pause the campaign. Stopping does not admit anything and removes the most expensive category of continued violation.
4. Verify the sender and pull your own records on the facts alleged.
5. Notify your insurance broker in writing. Some claims are covered; late notice forfeits the ones that are.
6. Decide whether to take advice. Chapter 14 covers how, and chapter 13 covers the decision.
7. Reply in writing before the deadline, even if the reply is a request for time. Chapter 12 sets out what a reply contains.

1.6When you need a lawyer

When the amount is large relative to the business. When an individual is named. When the claim is under a statute with fee-shifting, because losing means paying the other side's lawyer too. When the letter is one of several, or signals a wider pattern. When you hold a real defence, such as a licence, a consent record or a contract, and want it used properly. For a small, specific, well-founded claim, an hour of advice to check the release may be all that is needed.