Demand letters: The first step in collecting on unpaid contracts

Part of doing business is getting paid for products or services. When Massachusetts businesses encounter clients or customers who fail to pay on their contracts, a friendly reminder call or email may not be enough. If it becomes necessary to take additional steps, sending a demand letter could be the next step before taking more formal steps, such as filing a lawsuit.

For some reason, some people fail to understand that they must fulfill their contractual obligations and that a business does have legal options to make that happen. They may think that the business will not come after them expecting payment, but they would be wrong. A demand letter lets a customer or client know that the business expects to be paid and will avail itself of all legal options available to collect.

When formulating a demand letter, it is important to include all of the relevant information from the beginning. This includes not only letting the customer or client know that they still owe a balance, but explaining why they do and outlining that the company already fulfilled its part of the contract, so now it is his or her turn to do the same. Details are important since this communication is the first step on the road to a lawsuit, so laying out as much of the circumstances as possible could help if the matter ends up in court. The company is laying out its legal arguments regarding how the other party breached the contract and what is expected to rectify the situation.

Not many people outside the legal field truly understand what needs to go into demand letters. As mentioned above, it involves more than just requesting payment. The first reference point should be the contracts Massachusetts businesses rely on when providing their goods or services to customers. Sometimes, a less gentle reminder of their responsibilities can encourage customers to follow through with their part.